Dissertation Project

Does foreign direct investment (FDI) affect economic development, inequality, social tensions, government decision-making, and citizen frustration with the government in developing countries? In this dissertation, I examine the political and socioeconomic consequences of FDI at the national, local, and individual levels. I argue that FDI, which accounts for up to 5\% of national GDP and has increased in recent decades, creates jobs directly at the location where it is invested. Due to limited mobility, the primary beneficiaries of FDI projects are located in the geographical proximity of the investment. This creates local growth but also leads to intra-regional inequality. Since not every worker has an equal chance to benefit from job creation, I expect the distributional consequences of FDI to affect individuals’ subjective insecurity and lead to greater dissatisfaction with the government. Given the distributional consequences of FDI, governments need to mediate between the interests of workers and investors and are expected to change labor rights. It is further argued that people who belong to an underrepresented or discriminated group will report lower satisfaction once exposed to FDI. I examine spatial and geo-referenced FDI data to model marginal growth and inequality effects in local industries and aim to understand whether FDI leads to frustration and (dis)satisfaction with the government. This dissertation presents evidence that FDI is associated with positive and negative changes in different kinds of labor rights, higher local economic development, and regional inequality effects that develop over time. Furthermore, I find that FDI negatively affects people’s economic insecurity and political satisfaction with their government. Dissatisfaction with the government results from FDI, especially for citizens whom the current government does not favor. Assuming that individual (dis)satisfaction with the government is the starting point for many IPE research interests - there is no protest without individual frustration and no re-election of incumbents without satisfaction - I hope to bring a better understanding of how FDI projects, among other factors, drive economic insecurity and frustration with the government. By applying difference-in-differences models based on local geo-referenced FDI, nighttime light, population, and survey data, this dissertation also aims to make a methodological contribution to the IPE literature.

The Dissertation has been published online via mediaTUM.