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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 82:
Bureaucratic Corruption, MNEs and FDI

Tobias Dahlström () and Andreas Johnson

Abstract: This paper adds to the limited number of studies analysing the relationship between host country corruption and FDI inflows. A model describes the incentives foreign MNEs and host country bureaucrats have for engaging in corruption and shows how corruption increases the MNE costs of operations in the host country. The model predicts that the costs caused by corruption reduce FDI inflows. Regression analysis using panel data finds that host country corruption has a significant negative effect on FDI inflows to developing economies but not for developed economies.

Keywords: corruption; foreign direct investment; multinational enterprises; (follow links to similar papers)

JEL-Codes: D73; F21; F23; (follow links to similar papers)

40 pages, February 13, 2007

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