Resource title

Aid, Governance, and Private Foreign Investment: Some Puzzling Findings and a Possible Explanation

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image for OpenScout resource :: Aid, Governance, and Private Foreign Investment: Some Puzzling Findings and a Possible Explanation

Resource description

Does official aid pave the road for private foreign investment or does it suffocate private initiative by diverting resources towards unproductive activities? In this paper we explore this question using data for a large number of developing and emerging economies. Controlling for countries? institutional environment, we find that, evaluated at the mean, the marginal effect of aid on private foreign investment is close to zero. Surprisingly, however, the effect is strictly positive for countries in which private agents face a substantial regulatory burden. After testing the robustness of this result, we offer a theoretical model that is able to rationalize our puzzling observation.

Resource author

Philipp Harms, Matthias Lutz

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Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19218

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Adapt according to the presented license agreement and reference the original author.