Abstract
The political economy literature investigates the determinants of foreign direct investment (FDI) based largely on aggregate data, ignoring the actual decision makers. The authors conduct a survey of U.S. chief executive officers— the actual decision makers—of corporations that have investments in Latin America to understand FDI inflows. The authors find that investment risk related to property-rights protection, adherence to rule of law, and an effective court system weighed most heavily in U.S. firm preferences. The results suggest that rather than stress democracy itself as a determining factor, researchers might better focus on the institutions found within democracies.
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