Does a nonlinear specification methodology better capture the link between host country corruption levels and inward foreign direct investments A study of 92 countries

This paper investigates the link between inward foreign direct investment flows and host country corruption levels using annual data for developed, developing and transitional countries, over the 2002-2015 period. We find that the nonlinear specification provides a better characterisation of the relationship between corruption and inward FDI flows. Furthermore, we find that this relationship is a function of the development status of the host country. Finally, the marginal impact of corruption levels on FDI seems to be statistically significant at a higher level when a nonlinear (as opposed to a linear) specification is used.