Foreign Direct Investment in oil-abundant countries: The role of institutions

Federico Carril-Caccia; Juliette Milgram-Baleix; Jordi Paniagua

doi:10.1371/journal.pone.0215650

Foreign Direct Investment in oil-abundant countries: The role of institutions

PLoS One. 2019 Apr 23;14(4):e0215650. doi: 10.1371/journal.pone.0215650. eCollection 2019.

Authors

Federico Carril-Caccia^{1

2}, Juliette Milgram-Baleix¹, Jordi Paniagua³

Affiliations

¹ Department of Economic Theory and History, University of Granada, Granada, Spain.
² Department of Economic Analysis and Political Economy, University of Seville, Seville, Spain.
³ Department of Economic Structure, University of Valencia, Valencia, Spain.

Abstract

The present work reassesses the impact of good governance and democracy on Foreign Direct Investment (FDI) in oil-abundant countries. To this end, we estimate the effect of host countries' institutions on greenfield FDI, using a gravity equation for a dataset that covers 182 countries during 2003-2012. Our findings confirm that compliance to rule of law, lack of corruption, political stability and democracy could boost new FDI links through the extensive margin. Our results could not rule out the "oil curse", meaning that oil producers attract fewer new greenfield projects than similar countries without oil. Unlike other studies, we show that the impact of institutions is not necessarily undermined by the presence of natural resources.

Publication types

Research Support, Non-U.S. Gov't

MeSH terms

Democracy
Developing Countries / economics*
Government*
Internationality
Investments*
Models, Economic*
Oil and Gas Industry / economics*

Grants and funding

This work was supported by: Consejería de Economía, Innovación, Ciencia y Empleo, Junta de Andalucia [SEJ 340], https://juntadeandalucia.es/ (JM, FC); Forum Euromediterraneen des Instituts de Sciences Economiques [FEM41-07], www.femise.org/en (JM, JP, FC); Ministerio de Economía, Industria y Competitividad, Gobierno de España [ECO2015-68057-R]; www.mineco.gob.es/ (JP); and Generalitat Valenciana [GV/2017/052], www.gva.es (JP, FC). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.