Corruption and FDI in natural resources: The role of economic downturn and crises

Cruz M. D., Jha C. K., Kırşanlı F., Sedai A. K.

Economic Modelling, cilt.119, 2023 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 119
  • Basım Tarihi: 2023
  • Doi Numarası: 10.1016/j.econmod.2022.106122
  • Dergi Adı: Economic Modelling
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Public Affairs Index
  • Anahtar Kelimeler: Foreign direct investment, Corruption, Economic downturn, Sovereign debt, Fiscal crisis, Natural resources
  • Yozgat Bozok Üniversitesi Adresli: Evet

Özet

© 2022 Elsevier B.V.This study adds to largely non-existent literature on corruption and foreign direct investment (FDI) in natural resources by examining the association between the two using a panel of 20 Latin American and Caribbean countries from 1995 to 2020. We find that higher levels of corruption are associated with lower levels of FDI in natural resources, supporting the “grabbing hand” or “sand-the-wheel” hypothesis. Further, we argue that during economic downturns and crises, corrupt agents are likely to use the prevalence of corruption to disregard laws to attract greater FDI in natural resources to compensate for the adversity brought about by hard times. Consistently, we find that while still detrimental to resource FDI, corruption's diminishing effects on resource FDI are much less pronounced during economic downturns and fiscal crises, with the latter measured by credit events leading to a reduction in the present value of the sovereign debt.