Distributional Consequences and Executive Regime Types: The Politics of Foreign Direct Investment Incentives

Abstract

This dissertation examines variation in the provision of foreign direct investment (FDI) incentives. If FDI is crucial for economic growth, why do some countries offer high levels of incentives to attract FDI, while other countries do not? This study identifies the political dimensions behind FDI incentives provision in democratic countries. I argue that provision of FDI incentives depends on the distributional consequences of FDI and a country's executive regime type. FDI inflows compete up wages and drive down rents, which implies that labor prefers high levels of FDI and FDI incentives, while native capital opposes FDI and FDI incentives. These preferences towards FDI incentives are moderated, however, by a country's executive regime type. Parliamentary democracies, which are more supportive of labor's interests, are expected to provide higher levels of FDI incentives as compared to presidential democracies, which are less supportive of labor. After deriving testable hypotheses using the tools of game theory, I examine the politics of FDI incentives provision by analyzing an original cross-national dataset of FDI incentives generated with machine learning techniques. I then explore the politics of FDI incentives provision by comparing case studies of Poland, a parliamentary democracy, and Romania, a presidential democracy. A final empirical chapter uses unique survey data from Poland to study individual-level attitudes towards FDI incentives.