CEU Electronic Theses and Dissertations, 2008
| Author | Ginzburgs, Boriss |
|---|---|
| Title | Institutional Quality and the Composition of Foreign Direct Investment |
| Summary | This thesis analyzes the effect of institutions on sectoral composition of foreign direct investment. A model is developed which posits a continuum of firms operating in sectors with different capital intensities. Each firm can allocate capital to a foreign country. The model predicts that institutional quality is positively related to FDI inflows in all sectors, with an especially strong effect on capital-intensive sectors. These results are confirmed by an empirical analysis of accumulated bilateral FDI. Subsequently, the model is extended to account for international trade. It is found that differences in institutional quality affect the pattern of trade and further increase the asymmetry in sectoral structure of FDI. Developing countries with deficient institutions become specialized in exporting labor-intensive goods, and the bias towards labor-intensive FDI is further reinforced. Institutions thus play a crucial role in determining both the pattern of specialization and the composition of FDI flows, which accentuates the importance of institutional reforms in development policy. |
| Supervisor | Konya, Istvan |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2008/ginzburgs_boriss.pdf |
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