Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/328137 
Year of Publication: 
2022
Citation: 
[Journal:] Review of Economic Analysis (REA) [ISSN:] 1973-3909 [Volume:] 14 [Issue:] 3 [Year:] 2022 [Pages:] 441-469
Publisher: 
International Centre for Economic Analysis (ICEA), Waterloo (Ontario)
Abstract: 
This paper presents a model of a forward-looking government wooing foreign direct investment by enacting policies that reflect its commitment to the foreign enterprise. The ease with which the government is able to spend or carry out economic reform to complement the foreign venture evolves over time and influences the likelihood of its sustained commitment. The domestic and external strength of the government, the stability and not necessarily the level of returns from the project, venture-specificity of government spending or reform, and public and elite attitudes toward foreign commercial entry determine how invested the government remains in the long term success of the enterprise. More committed governments tend to be stronger and prefer robust investor-regime relationships. Reform that is not designed too narrowly to favor the investor is also less likely to be reversed later. Like pro-FDI public sentiment, a noisy policy environment induces deeper government commitment.
Subjects: 
FDI
Policy reform
Strength of government
JEL: 
F20
F21
O24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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