Barriers to Foreign Direct Investment Under Politi

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Barriers to Foreign Direct Investment Under Political Instability: A Reprint from the “Economic Quarterly”

Describes some stylized facts about expropriation

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By Marina Azzimonti (au); Pierre-Daniel G. Sarte (au)
Year: 2007
Pages: 28
Binding Paperback

Product Code: 1422319830

Description

Describes some stylized facts about expropriation of Foreign Direct Investment (FDI). Develops a theory that relates direct & indirect forms of expropriation to the degree of political instability (the frequency at which groups alternate in power) & concentration of power (the number of powerful groups affecting policy). Lack of commitment of a gov’t. that cannot write binding contracts with multinational corp., together with the existence of redistributive uncertainty of the amount expropriated, result in excessive expropriation. Countries that are politically stable attract more FDI because foreign investors expect lower expropriation rates. This result holds as long as power is concentrated between a few number of influential groups. Illus.

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