Are Some Dictators More Attractive to Foreign Investors?

40 Pages Posted: 10 Jul 2019 Last revised: 18 Nov 2021

See all articles by Abel François

Abel François

University of Lille

Sophie Panel

Institut de Recherche Stratégique de l’Ecole Militaire (IRSEM - Institute for Strategic Research)

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: July 8, 2019

Abstract

Since political uncertainty is greater in dictatorships than in democracies, we test the hypothesis that foreign investors scrutinize public information on dictators to assess this risk. In particular, we as-sume they use five suitable dictators’ characteristics: age, political experience, education level, ed-ucation in economics, and prior experience in business. We perform fixed effects estimations on an unbalanced panel of 100 dictatorial countries from 1973 to 2008 to explain foreign direct investment (FDI) inflows. We find that educated dictators are more attractive to foreign investors. We obtain strong evidence that greater educational attainment of the leader is associated with higher FDI. We also find evidence that the leader having received education in economics and prior experience in business is associated with greater FDI. By contrast, the leader’s age, and political experience have no relationship with FDI. Our results are robust to several tests and checks, including a comparison with democracies.

JEL Classification: F21, F23

Suggested Citation

François, Abel and Panel, Sophie and Weill, Laurent, Are Some Dictators More Attractive to Foreign Investors? (July 8, 2019). BOFIT Discussion Paper No. 12/2019, Available at SSRN: https://ssrn.com/abstract=3417540 or http://dx.doi.org/10.2139/ssrn.3417540

Abel François (Contact Author)

University of Lille ( email )

Cité Scientifique
Villeneuve-d'Ascq, 59650
France

Sophie Panel

Institut de Recherche Stratégique de l’Ecole Militaire (IRSEM - Institute for Strategic Research) ( email )

École Militaire - case 38
1, place Joffre
Paris SP 07, 75007
France

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

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