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description Journal article public Fiscaoeconomia

Does FDI Affect Social Protests Level?: Panel Granger Causality Test

Deniz Güverci̇n
Published 30 Eylül 2017

Abstract

FDI as an the extension of foreign economic units has significanteconomic and political impacts on host country. The literature focusing on thepolitical determinants of the FDI inflows does not put emphasis on whether FDI canredetermine the level of political rights, social protests, riots in the host country. This study bringsnew insight by adding the relevant literature the issue of the impact of FDI onsocial protests level in the host countries by bringing the cross countryevidence. I refer in the paper some channels through which FDI can affectsocial demonstrations. The main channel, along with others, I emphasize thatif the growth-enhancing FDI keepsflowing and creating economic growth, voters get more motivated to vote for the incumbent party. Iargue that incumbent government to draw benefits out of strong economic recordpumped by FDI inflows, releases the restrictions on the political rights, andeases the harsh repression to avoid political uncertainty which decreases thelevel of collective action problem and increase the social protest levels.Dumitrescu & Hurlin Panel Granger test is implemented to test FDI-Socialprotest causality using the relevant data of six European countries. Testresults indicate that there is bi-directional causality running from FDI toSocial protest level that implies that FDI has an impact on protest level inthe host country.

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