Authors
(FDI) in developing countries. The FDI literature comprises two opposing views of corruption—the grabbinghand hypothesis holds that corruption impedes FDI by raising uncertainty and transaction costs and the helpinghand hypothesis holds that corruption facilitates FDI by greasing the wheels of commerce in the presence ofweak regulatory frameworks. This study analyzes the impact of corruption on FDI inflows in 53 countries inAfrica over the 1995–2012 period. Using the dynamic System Generalized Method of Moments modelingframework (Arellano-Bover/Blundell-Bond linear dynamic panel), this study finds support for the helping handhypothesis, i.e., corruption facilitates FDI inflows in Africa. It is likely that the overall regulatory environment inAfrica is weak, which helps explain the context in which the helping hand hypothesis can be validated. Inaddition, this study finds that past levels of FDI, market size, government effectiveness, infrastructure, andeconomic freedom also affect FDI significantly. These results further our knowledge of the FDI dynamics inAfrica, which policymakers should find helpful in devising pro-FDI strategies
No takes yet. Share an insight, caveat, or question.
Quazi et al. (2014) studied this question.