Nexus between Political Regime and FDI Revisited: A Cross-Country Evidence
This research investigates the relation between political regime and foreign direct investment (FDI) at cross-country level. It has been long debated issue whether democratic or autocratic system of government attracts FDI in host country. The current study gathers new evidence using the cross-country data of 28 countries for the period of 1995-2016 to explore the effect of political regime on FDI. The data of regime type has been taken from Freedom House and represents top fourteen (14) democratic countries and top fourteen (14) autocratic countries. Inward FDI figures have been downloaded from World Bank Indicators. The comparative assessment of top ten recipients of FDI, with respect to political regime type, includes both democratic and autocratic countries over the years. Thus, it provides the mixed evidence that political regime does not play a significant role in the long-run for attracting more FDI. However, the greater inflows of FDI in host country depend upon the effective long-term and persistent investors’ friendly policies. The investors and policy makers should understand the role of economic, social, cultural and other policy variables while devising appropriate strategies rather than relying upon mere classification of political regime type.