Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2015
Abstract
This paper builds a theory to characterize the comparative advantage of MNEs based in countries of different institutional qualities. It is shown that MNEs headquartered in countries of poorer state institutions will invest more in `informal institutions; and choose to undertake FDI in countries of weaker institutions. At the aggregate, MNEs on average generate more net profits in countries of weaker institutions, the poorer the institutional environment at home. I conduct an extensive test of the theory using bilateral FDI volume for 219 economies in year 2001-2010. The results indicate a statistically significant and robust institutional complementarity effect in bilateral FDI volume.
Keywords
Informal Institution, Foreign Direct Investment, Gravity Equation, Tobit
Discipline
International Economics
Research Areas
International Economics
First Page
1
Last Page
39
Publisher
SMU Economics and Statistics Working Paper Series, No. 16-2015
City or Country
Singapore
Citation
CHANG, Pao-Li.
Institutional complementarity across countries in bilateral FDI flows: Theory and evidence. (2015). 1-39.
Available at: https://ink.library.smu.edu.sg/soe_research/1793
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.