Working Paper No. 641

Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms

Published: May 11, 2005; revised 2007 Pages: 45Keywords: FDI; Corruption; Multinational FirmJEL-codes: D73; F21; F23

Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms Katariina Hakkala, Pehr-Johan Norbäck and Helena Svaleryd

We examine the effect of corruption on foreign direct investments (FDI). Starting out from the theory of FDI, we show that corruption can have different effects on horizontal investments, which are primarily aimed at sales to the local market, compared to vertical investments, which are made to access lower factor costs for export sales. Using Swedish firm-level data, we find that corruption reduces the probability that a firm will invest in a country. Moreover, when studying the different types of investments, we find that horizontal investments, measured by affiliate local sales, are to a larger extent than vertical investments deterred by corruption. We are also able to establish a causal effect of corruption on FDI.


 Original version

Pehr-Johan Norbäck


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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