Monopoly Rents and Foreign Direct Investment in Fixed Assets

View Researcher's Other Codes

Disclaimer: The provided code links for this paper are external links. Science Nest has no responsibility for the accuracy, legality or content of these links. Also, by downloading this code(s), you agree to comply with the terms of use as set out by the author(s) of the code(s).

Authors Joseph D. Wright, Boliang Zhu
Journal/Conference Name INTERNATIONAL STUDIES QUARTERLY
Paper Category
Paper Abstract In the past two decades, much of foreign direct investment (FDI) in the primary sector has flowed to unconventional, politically risky destinations. This presents a puzzle for theories that emphasize the ex post immobility of—and hence high potential expropriation risk for—fixed asset investment. Existing theories overlook one critical aspect of fixed assets: large capital requirements and high sunk costs act as entry barriers, resulting in market concentration and strong firm incentive for monopoly rent extraction. Personalist dictatorships, we posit, provide an attractive institutional environment for fixed asset investors. In such systems, the control of key economic sectors by the families of leaders, combined with a lack of institutional constraints, facilitate rent-seeking activities. We find that personalist dictatorships receive significantly more foreign investment in the primary sector, and fixed-asset intensive industries in general, than other regimes. This study highlights the importance of accounting for heterogeneity among investors and political regimes to understand the politics of FDI.
Date of publication 2018
Code Programming Language R
Comment

Copyright Researcher 2022