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This paper investigates the potential of Foreign Direct Investment (FDI) to counter socio-political instability, one of the most pressing challenges faced by developing countries. Socio-political (in)stability is approached from an institutional perspective and linked to one particular type of FDI, greenfield FDI, for its more direct socio-economic externalities and their influences on greed and grievance. The issue of causality is primarily addressed using a gravity-based instrumental variable for FDI, taking advantage of bilateral greenfield projects data. The empirical results using data over the period 2003-2017 for a large sample of developing countries show that FDI favors institutional development not only in terms of overall socio-political stability but also human rights compliant socio-political stability. The results are robust to a range of specifications and alternative identification strategies, as well as to a series of sensitivity tests. Overall, this study highlights the promotion of political stability as another channel through which FDI can contribute to development.

This paper investigates the potential of Foreign Direct Investment (FDI) to counter socio-political instability, one of the most pressing challenges faced by developing countries. Socio-political (in)stability is approached from an institutional perspective and linked to one particular type of FDI, greenfield FDI, for its more direct socio-economic externalities and their influences on greed and grievance. The issue of causality is primarily addressed using a gravity-based instrumental variable for FDI, taking advantage of bilateral greenfield projects data. The empirical results using data over the period 2003-2017 for a large sample of developing countries show that FDI favors institutional development not only in terms of overall socio-political stability but also human rights compliant socio-political stability. The results are robust to a range of specifications and alternative identification strategies, as well as to a series of sensitivity tests. Overall, this study highlights the promotion of political stability as another channel through which FDI can contribute to development.

Institutional quality is considered one of the most important, if not the most important, determinants of long-run growth. For many de- velopment specialists, development gaps between rich countries and developing countries lie in the weakness of the latter group's institu- tions, which results from both internal and external factors. Regarding external factors, the recent decades have seen a (overall) rapid and continuous increase in Foreign Direct Investment (FDI) flows to devel- oping countries. This surge in FDI inflows, beyond its direct economic consequences in host countries, has other implications, notably for the institutional environment. Because good institutions reduce the cost of doing business for Multinational Corporations (MNCs), governments competing to attract FDI tend to align the institutional framework in their countries with the needs of foreign direct investors. In ad- dition, MNCs can resort to lobbying and pressure to influence local institutions. Against this backdrop, this thesis examines how external actors, through FDI, can contribute to institutional development in the developing world. This thesis, therefore, explores the institutional change potential of FDI in developing countries through three chapters using suitable statistical and econometric tools. Each chapter explores a specific aspect of institutions, namely economic institutions, approached notably with the protection afforded to private property (Chapter 2), socio-political stability (Chapter 3), and corruption (Chapter 4). This thesis also explores heterogeneity in the forms of FDI, which could result in differential institutional impacts. Chapter 2 investigates how the quality of economic institutions in developing countries responds to changes in FDI inflows. The results show that economic institutions improve in countries with larger FDI flows and this effect is driven by FDI from developed economies while no significant link is detected for FDI from developing economies. Furthermore, they indicate that the positive ...

Institutional quality is considered one of the most important, if not the most important, determinants of long-run growth. For many de- velopment specialists, development gaps between rich countries and developing countries lie in the weakness of the latter group's institu- tions, which results from both internal and external factors. Regarding external factors, the recent decades have seen a (overall) rapid and continuous increase in Foreign Direct Investment (FDI) flows to devel- oping countries. This surge in FDI inflows, beyond its direct economic consequences in host countries, has other implications, notably for the institutional environment. Because good institutions reduce the cost of doing business for Multinational Corporations (MNCs), governments competing to attract FDI tend to align the institutional framework in their countries with the needs of foreign direct investors. In ad- dition, MNCs can resort to lobbying and pressure to influence local institutions. Against this backdrop, this thesis examines how external actors, through FDI, can contribute to institutional development in the developing world. This thesis, therefore, explores the institutional change potential of FDI in developing countries through three chapters using suitable statistical and econometric tools. Each chapter explores a specific aspect of institutions, namely economic institutions, approached notably with the protection afforded to private property (Chapter 2), socio-political stability (Chapter 3), and corruption (Chapter 4). This thesis also explores heterogeneity in the forms of FDI, which could result in differential institutional impacts. Chapter 2 investigates how the quality of economic institutions in developing countries responds to changes in FDI inflows. The results show that economic institutions improve in countries with larger FDI flows and this effect is driven by FDI from developed economies while no significant link is detected for FDI from developing economies. Furthermore, they indicate that the positive ...

Institutional quality is considered one of the most important, if not the most important, determinants of long-run growth. For many de- velopment specialists, development gaps between rich countries and developing countries lie in the weakness of the latter group's institu- tions, which results from both internal and external factors. Regarding external factors, the recent decades have seen a (overall) rapid and continuous increase in Foreign Direct Investment (FDI) flows to devel- oping countries. This surge in FDI inflows, beyond its direct economic consequences in host countries, has other implications, notably for the institutional environment. Because good institutions reduce the cost of doing business for Multinational Corporations (MNCs), governments competing to attract FDI tend to align the institutional framework in their countries with the needs of foreign direct investors. In ad- dition, MNCs can resort to lobbying and pressure to influence local institutions. Against this backdrop, this thesis examines how external actors, through FDI, can contribute to institutional development in the developing world. This thesis, therefore, explores the institutional change potential of FDI in developing countries through three chapters using suitable statistical and econometric tools. Each chapter explores a specific aspect of institutions, namely economic institutions, approached notably with the protection afforded to private property (Chapter 2), socio-political stability (Chapter 3), and corruption (Chapter 4). This thesis also explores heterogeneity in the forms of FDI, which could result in differential institutional impacts. Chapter 2 investigates how the quality of economic institutions in developing countries responds to changes in FDI inflows. The results show that economic institutions improve in countries with larger FDI flows and this effect is driven by FDI from developed economies while no significant link is detected for FDI from developing economies. Furthermore, they indicate that the positive ...