Author(s)

Louis Jaeck^1,2*, Sehjeong Kim³

¹College of Business and Economics, Department of Economics and Finance, United Arab Emirates University, Al Ain, United Arab Emirates.
²CERGAM-CAE, Aix-Marseille University (AMU), Marseille, France.
³Department of Mathematical Science, United Arab Emirates University, Al Ain, United Arab Emirates.

This paper analyzes the setting of a reform towards liberalization of FDI policies as a political compromise pressured by the lobbying of a domestic lobby and a foreign MNC lobby. Using a common agency model of lobbying, we show that, under specific conditions, the interest group’s influence is not distortive for a critical distribution of supporters over non-supporters of the reform. Also, our political economy framework shows that exogenous provision of information on the beneficial effects of FDI liberalization paradoxically weakens the reform process.

Foreign Direct Investment, Lobbying, Common Agency, Beliefs, Political Economy

Jaeck, L. and Kim, S. (2016) FDI Regulatory Reform and Political Beliefs: A Political Economy Approach. Theoretical Economics Letters, 6, 1205-1218. doi: 10.4236/tel.2016.66114.