In the present paper one finds a cross country examination for the effect of crime on Foreign Direct Investment, over a seven year period covering the years 1998-2004. We extend literature by controlling for crime endogeneity, considering financial crimes and finally testing for heterogeneous crime effects according to country’s wealthiness. The system GMM estimator is adopted as it allows to treat variables as endogenous and corrects bias when a lagged dependent variable is used. We confirm earlier literature that only violent related crimes seem to affect FDI. While, we fail to find evidence supporting differentiated crime effect depending to country’s wealthiness.
"Has Foreign Direct Investment exhibited sensitiveness to crime across countries in the period 1999-2004? And if so, is this effect non-linear?,"
Undergraduate Economic Review: Vol. 7
, Article 15.
Available at: http://digitalcommons.iwu.edu/uer/vol7/iss1/15