Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/81195 
Year of Publication: 
2005
Series/Report no.: 
IUI Working Paper No. 641
Publisher: 
The Research Institute of Industrial Economics (IUI), Stockholm
Abstract: 
We examine the effect of corruption on foreign direct investments. Our model shows that corruption may have different effects on investments aimed at selling to a local market, in comparison to investments aimed at selling from the corrupt market. Using Swedish firm-level data, we find that affiliate local sales decrease with corruption, while affiliate exports increase. Finally, corruption has a negative effect on the probability that a foreign firm will invest in a country. These results are consistent with theory when bribing reduces production costs and local firms have an advantage in bribing vis à vis foreign firms.
Subjects: 
FDI
Corruption
Multinational Firm
JEL: 
D73
F21
F23
Document Type: 
Working Paper

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