Li and Resnick (2003)- Reversal of Fortunes- Democratic Institutions and FDI Inflows to LDCs

Li and Resnick (2003)- Reversal of Fortunes- Democratic Institutions and FDI Inflows to LDCs

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries By: Quan Li and Adam Resnick (2003) Li, Quan, and Adam Resnick. 2003. “Reversal of Fortunes: Democratic Institutions and Foreign Direct Investment Inflows to Developing Countries.” International Organization. 57(1): 175-211. 1. Question: Does increased Democracy lead to greater FDI inflows? 2. Novel Approach: a. Use firms as unit of measurement rather than the state b. Separate the effects of Democracy and respect for property rights c. Offer theoretical reasoning why democracy can affect FDI positively AND negatively 3. Theoretical Perspective: (neolib?) 4. Theory: a. Property rights decrease the risks of investment b. Democracy increases respect of property rights c. Democracy ITSELF reduces incentives for firms to invest (because it makes rents harder to gain) 5. Methods: a. pooled Cross-Sectional Time Series and numerous Robustness checks b. OLS with Panel-Corrected SE’s 6. Findings a. Property rights increase FDI (regardless of regime) b. Democracies increase property rights c. Once property rights are controlled for, the importance of democracy disappears in predicting FDI inflows 7. Critiques/Questions: Section 1: Introduction Huge explosion in FDI since 1980 (especially in LDCs) Also Huge explosion in democracy since 1975 Lit Review: 1. Olson: dems lead to property rights which means firms are protected from dictatorial whims / Greater FDI 2. O’Donnell: “…autocrats shield foreign capital from popular pressure for higher wages, stronger labor protection, or less capital-friendly taxation.” 176 / leads to greater FDI for autocrats
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Authors find that FDI can be both helped and hurt through democratic institutions: 1. DEM HURTS FDI a. “…constraints over elected politicians tend to weaken the oligopolistic or monopolistic positions of MNEs.” b. “…these constraints further prevent host governments from offering generous financial and fiscal incentives to foreign investors.” c. “…broad access to elected officials and wide political participation offer institutionalized avenues through which indigenous businesses can seek protection.” 177 2. DEM HELPS FDI
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

Li and Resnick (2003)- Reversal of Fortunes- Democratic Institutions and FDI Inflows to LDCs

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online