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What attracts foreign direct investment into autocratic states? Regime time horizon and institutional design
Author(s) -
Cui Lin,
Moon Chungshik
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12956
Subject(s) - autocracy , foreign direct investment , horizon , investment (military) , economics , international economics , market economy , economic system , political science , macroeconomics , law , democracy , politics , physics , astronomy
States play a critical role in designing institutions to facilitate international business. We study the effect of autocratic states' time horizons on their attraction of foreign direct investment (FDI) through designing domestic and international institutions. We argue that autocrats with a long time horizon tend to build credible domestic commitment‐institutions that attract foreign investors; however, they are also likely to affect the design of commitment carve‐outs in international institutions, in particular bilateral investment treaties, thus weakening their institutional effect on foreign investment. We test these dual effects of regime time horizon on FDI inflow using data from 80 autocratic states over a 33‐year period and find substantial support for our arguments.