Political Competition and FDI Inflows: Empirical Findings

This chapter provides an empirical test of the hypothesis that greater political competition in nondemocratic states will be associated with reduced FDI investment inflows. Using FDI data collected from the World Bank and data on political competition from V-Dem and Polity V, this chapter develops a model of state-level FDI inflows based on Li and Resnick (Int Organ 57(1):175–212, 2003). The primary models illustrate that FDI inflows are negatively associated with several measures of political competition during the period since 1980. This chapter also explores a case study vignette illustrating the negative impact of policy uncertainty on FDI in Venezuela in the period following the election of Hugo Chavez in 1999.