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Directorate for Financial and Enterprise Affairs

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Foreign direct investment, corruption and the OECD Anti-Bribery Convention

This paper estimates a dynamic foreign direct investment (FDI) gravity model to explore the impact of corruption in general and the OECD Anti-Bribery Convention in particular. The evidence from previous studies in both domains is mixed, probably due to econometric inconsistencies and misuse of data. The more robust findings are that corruption has an insignificant or even positive effect on FDI in the general population. However, adherence to the OECD Anti-Bribery Convention has a clear negative impact on FDI—countries that adhere reduce investments in corrupt destinations.

Published on January 25, 2017

In series:OECD Working Papers on International Investmentview more titles

Key findings

A 1 point rise in the corruption perception index reduces investment flows by companies from countries Party to the OECD Anti-Bribery Convention by a range of 4-9%.
Voice and accountability of governments in an open society, political stability and well-run countries with sound regulations are attractive to foreign investors.
Increasing the number of countries party to the Anti-Bribery Convention and better enforcing laws within these countries could begin to turn the tide further against the corruption industry.