Political risk, FDI and economic growth: A cross national studie

With this thesis the aim is to investigate the effect political risk has on economic growth and how it influences the inflow of foreign direct investment (FDI). The purpose is also to investigate the relationship between inflow of FDI and economic growth. In order to em-pirically examine if there is a relevant correlation between the variables a study of cross-section data is performed. In the regressions carried out, an index of property rights is used as an indicator of political risk. The findings from the analysis clarify that the inflow of FDI is affected by the degree of political risk, and thus FDI increases economic growth in the country through technological spill-overs. Furthermore, from the empirical results it can be concluded that countries with secure property rights experience positive economic growth whereas countries with poor protection of property rights have negative economic growth.

Author: Brask, Jeanette,Falck, Josefine

Source: Jönköping University

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