Effects Of Corruption On FDI

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There are two theories that emerge about the effect of corruption on FDI one is the grabbling hand where corruption impedes on FDI with followers like Wei ( 2000) who found that corruption reduces FDI more than others factors or also that is like a taxes for investors. In contrast, several studies either found no evidence to support the grabbling hand theories or found results that support the helping hand theories where corruption facilitates FDI in a weak regulation environment.
There many aspects where corruption is seen to have a negative effect on FDI. The first is it can increase the cost of FDI. It does because for some cases the company it represents a cost beside the fixed investment cost for implementing in a country so it is seen as an “extra taxes”. It …show more content…
Indeed in that point of view we can find some positive effect of corruption on FDI in a context of weak and unclear regulation environment. Corruption can reduce time for bureaucratic paper work, skip inspections, and reduce taxes and more benefits for your society. On the other hand some studies didn’t find significant effect on FDI. E.Stein (2002) study on FDI form 58 host countries didn’t find any correlation between corruption and FDI. (Adiya Belgibayeva, 2015) found that in some cases corruption may be seen an opportunity where the marginal cost of corruption may in some situation become neutral or positive. Baliamoune and Ndikumana (2008) found that corruption has significant effect on domestic investment and even if it has a negative effect on private investment, the results found it has a positive effect on the quantity of public investment by increasing them because of the important size of investment they generate then a bigger rent seeking and public investment has a positive

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