Political Institutions And Foreign Direct Investment In Developing Countries
- Topics:
- Foreign Direct Investment
- Tags:
- Currency & Foreign Exchange,
- Developing Country,
- Finance,
- Foreign Direct Investment,
- Foreign Direct Investment (FDI),
- Investment
- Source:
- Yale University
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Overview: In the 1990s, Foreign Direct Investment (FDI) became the largest single source of external finance in the developing world. Not only is FDI increasingly important in quantitative terms, it also has a number of qualitative characteristics important to developing countries. It is less volatile than portfolio flows, does not require repayment, and is considered to have a number of positive spillover effects such as technology transfer and access to new markets. In this paper, the author argues that foreign investors prefer a third political institution - credible commitment to stable, FDI-friendly policies - and that among the most effective signs of commitment is the presence of multiple veto players, i.e. individual or collective decision makers whose agreement is required for a change in policy.
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Format: PDF | Size: 198KB | Date: Sep 2006 | Pages: 43
