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Article: The effects of corruption on FDI inflows.
- Article from:
- The Cato Journal
- Article date:
- March 22, 2009
- Author:
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The surge in foreign direct investment (FDI) flows during the 1990s has motivated a host of recent studies into their determinants. Recently, the level of corruption in the host country has been introduced as one factor among the determinants of FDI location. From a theoretical viewpoint, corruption that is, paying bribes to corrupt government bureaucrats to get "favors" such as permits, investment licenses, tax assessments, and police protection--is generally viewed as an additional cost of doing business or a tax on profits. As a result, corruption can be expected to decrease the expected profitability of investment projects. Investors will therefore take the level of ...