Does a nonlinear specification methodology better capture the link between host country corruption levels and inward foreign direct investments? A study of 92 countries
by Chi-Hui Wang; Prasad Padmanabhan; Chia-Hsing Huang
Global Business and Economics Review (GBER), Vol. 23, No. 1, 2020

Abstract: This paper investigates the link between inward foreign direct investment flows and host country corruption levels using annual data for developed, developing and transitional countries, over the 2002-2015 period. We find that the nonlinear specification provides a better characterisation of the relationship between corruption and inward FDI flows. Furthermore, we find that this relationship is a function of the development status of the host country. Finally, the marginal impact of corruption levels on FDI seems to be statistically significant at a higher level when a nonlinear (as opposed to a linear) specification is used.

Online publication date: Mon, 13-Jul-2020

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