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Digging in the dirt? Extractive industry FDI and corruption

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Abstract

Does corruption attract or deter foreign investment in the extractive sectors? This article presents an econometric analysis of extractive industry foreign direct investment (FDI) inflows to 81 countries in the period 1996–2009. The results suggest that increased corruption within a country is associated with increased extractive industry FDI, but at a diminishing rate as corruption increases grow larger. For realistic changes in corruption, however, more corruption is associated with more extractive industry investment.

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Notes

  1. The data on extractive industry FDI was purchased from the data extract service of UNCTAD, which is found at http://unctad.org/en/Pages/DIAE/FDI%20Statistics/Data-Extract-Service.aspx. For a specification of subsectors included confer http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=2.

  2. This is similar to the arguments presented by Shleifer and Vishny (1994) on the benefits and costs to companies of political influence.

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Authors and Affiliations

  1. Chr. Michelsen Institute, P.O. Box 6033, Bedriftssenteret, 5892 , Bergen, Norway

    Ivar Kolstad & Arne Wiig

Authors
  1. Ivar Kolstad
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  2. Arne Wiig
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Correspondence to Ivar Kolstad.

Additional information

We thank Andreas Kotsadam, Fahmida Khatun, Debapriya Bhattacharya, Rehman Sobhan, participants at the expert group meeting at the Centre for Policy Dialogue on 8 November 2012 in Dhaka, Bangladesh, an anonymous reviewer and the journal editor for helpful comments. Funding from the Norwegian Ministry of Foreign Affairs is gratefully acknowledged.

Appendix

Appendix

Table 5 List of countries in main sample (N = 81)
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Kolstad, I., Wiig, A. Digging in the dirt? Extractive industry FDI and corruption. Econ Gov 14, 369–383 (2013). https://doi.org/10.1007/s10101-013-0133-2

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  • DOI: https://doi.org/10.1007/s10101-013-0133-2

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