چگونه فساد بر اثر سرمایه گذاری مستقیم خارجی بر روی رشد اقتصادی تاثیر می گذارد؟ How Does Corruption Influence the Effect of Foreign Direct Investment on Economic Growth?

۱٫ Introduction This paper empirically examines the effect of foreign direct investment (FDI) on economic growth, taking into account the corruption level in each of the 130 countries surveyed. Since the late 1990s, FDI flows among countries have risen dramatically alongside economic globalization (see Figure 1). As FDI is thought to be a potential source of economic growth, especially for developing countries, their governments initiate policies to actively attract FDI. As a direct effect, FDI-based capital flows enhance the accumulation of capital in a host country, and as an indirect effect, FDI flows contribute to economic growth in a host country by promoting productivity growth through technology transfer. In addition, FDI is an attractive source of capital because it is not a borrowing fund, so that host countries need not be concerned about debt accumulation. Expectations to earn profits through market expansion, and to take advantage of relatively low factor prices in host countries, serve as incentives for multinational enterprises (MNEs) to implement FDI. This is particularly the case for FDI flows from developed to developing countries. Endogenous growth theory suggests that knowledge and technology are necessities for improving productivity (e.g. Grossman & Helpman, 1991; Barro & Sala-i-Martin, 2004). Technology diffusion by FDI improves productivity and, as a result, enhances economic growth in host countries. However, previous studies, using country-level data, show that FDI alone does not necessarily have a significant impact on economic growth (e.g. Borensztein et al., 1998; Alfaro et al., 2004). Furthermore, most previous research at the firm level has found that FDI has an insignificant or a small effect on productivity and efficiency. These results are confirmed in the works of Haddad and Harrison (1993) for Morocco, Kokko (1994) for Mexico and Aitken and Harrison (1999) for Venezuela. Another strand of literature points out that FDI flows have a positive impact on economic growth if a host country possesses an appropriate absorptive capacity. For example, Borensztein et al. (1998) show that FDI promotes economic growth in a country in which human capital is above a certain level. Bengoa and Sanchez-Robles (2003) analyze the case of Latin American countries and indicate that FDI induces economic growth, depending on human capital, economic stability and liberalized markets. Balasubramanyam et al. (1996) confirm that FDI enhances economic growth more strongly in countries with export-oriented trade policies. Alfaro et al. (2004) show that financial development plays an important role as an absorptive factor in host countries, complementing the FDI impact on economic growth. This paper differs from those aforementioned in that it focuses on institutions as an absorptive factor in host countries.1 Institutional factors include various aspects of a country’s social development, such as corruption, democracy and racial and religious diversity. Among these, we focus especially on the role of corruption for several reasons. First, while international organizations such as the World Bank and the International Monetary Fund (IMF) require an elimination of, or at least a reduction in, corruption in a host country as a condition for financial support or foreign aid, profit-seeking firms engaging in FDI may invest in those countries where regulations are loose or poorly enforced. Second, some countries with high levels of both corruption and FDI inflows also achieve high levels of economic growth. For example, the FDI net inflow into Cambodia in 2007 was 10.38% as a share of gross domestic product (GDP), which is higher than the world average. While Cambodian FDI net inflows were very high, the country is also ranked as one of the most corrupt in the world. With a corruption perception index of 2.0 out of 10 in 2007, Cambodia is ranked 162 among 179 countries by Transparency International, a non-governmental organization that monitors political corruption in international development. However, despite its high corruption level, Cambodia has achieved a remarkable rate of economic growth over the last few years. Its per capita GDP growth rate in 2007 was 8.3%. The achievement of these high growth rates can be attributed to several factors, among which FDI is undoubtedly significant.2 Therefore, from the above discussion, we test the hypothesis that corruption serves as an important channel through which FDI affects economic growth. To investigate this hypothesis, we use annual data of 130 countries between 1995 and 2008 for estimation. Consistent with Borensztein et al. (1998) and Alfaro et al. (2004), the estimation results show that FDI alone does not necessarily promote economic growth. However, when its interaction term with corruption is added, we find that FDI inhibits economic growth in countries with low corruption, and promotes economic growth in those with high corruption levels. Therefore, corruption works as a “positive” absorptive factor. The threshold level of corruption, separating the negative and positive impacts of FDI on economic growth, is low – approximately in the 10th percentile from the least corrupt countries. A possible explanation for this result is that corruption works as an incentive for FDI. In host countries, corruption can weaken the enforcement of, for instance, labour and environmental regulations, and as a result, MNEs engaging in FDI can operate in a more advantageous environment, thereby promoting growth. As a robustness check, we conduct the instrumental variables (IV) regression to address endogeneity problems, and we perform the same regression with another corruption index. The results show that our main findings are robust, implying that reducing corruption levels may lessen the effect of FDI on economic growth. However, it is important to recognize that because corruption can have various negative impacts on the society of the host country, our findings do not imply that corruption should be encouraged to promote economic development. The rest of this paper is organized as follows. We explain the estimation methodology and data in Section 2, provide the empirical results in Section 3 and make concluding remarks in Section 4.