How does Religion Bias the Allocation of Foreign Direct Investment? The Role of Institutions

Jérôme Hergueux ()
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Jérôme Hergueux: LaRGE Research Center, Université de Strasbourg

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We construct a gravity model of worldwide foreign direct investment stock (FDI) in order to study the effect of religion on FDI allocation. We establish empirically that both bilateral religious similarity and bilateral religious diversity foster FDI at the country pair level. These apparently contradicting results confirm an empirical puzzle that has already emerged in the literature, particularly in the case of trade in goods. We investigate whether the answer to this puzzle could lie on the fact that the effect of these two variables play for different types of countries, depending on the level of efficiency of their institutions.

Keywords: culture; religion; institutions; trust; foreign direct investment. (search for similar items in EconPapers)
JEL-codes: F21 F23 O50 Z12 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cul, nep-int and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2012-06

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