Promoting socio-political stability through Foreign Direct Investment

Published on May 30, 2023 Updated on July 26, 2023
Dates

on the May 30, 2023

Focus on research

Promoting socio-political stability through Foreign Direct Investment

The growing importance of FDI flows to developing countries has implications for their institutional environment as (i) foreign investors do not always adapt to the local environment, (ii) FDI has induced institutional reforms in countries competing to attract them, and (iii) the socioeconomic effects of FDI can trigger institutional changes. The latter argument is what the paper mainly explores in positing that by generating economic opportunities, FDI promotes political stability. The results clearly align with this argument. Accounting for political repression, the findings also highlight that FDI-induced stability is compatible with governmental respect for human rights.

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