Private investment and political uncertainty

Stasavage, David (2000) Private investment and political uncertainty. DEDPS (25). Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

Recent theoretical and empirical work has demonstrated a clear negative link between macroeconomic and political uncertainty and levels of private investment across countries. This result raises the question what institutions might help reduce this uncertainty, in particular by allowing host governments to limit their own possibilities to act opportunistically with respect to investors. Some have argued that governments might benefit from joining a multilateral investment agreement, but there remain doubts both about the enforceability and the desirability of such an accord. An alternative possibility, proposed in a seminal article by North and Weingast (1989), is that political institutions characterized by checks and balances can allow governments to credibly commit not to engage in ex post opportunism with respect to investors. In this paper I propose a modified version of this hypothesis and test it using new cross-country data on political institutions. I also use a quantile regression technique which allows the estimated effect of political institutions to vary across countries and over time.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://sticerd.lse.ac.uk
Additional Information:	© 2000 David Stasavage
Divisions:	STICERD International Relations
Subjects:	H Social Sciences > HG Finance J Political Science > JA Political science (General)
JEL classification:	C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C33 - Models with Panel Data O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O38 - Government Policy
Date Deposited:	08 Jul 2008 09:04
Last Modified:	11 Dec 2024 18:28
URI:	http://eprints.lse.ac.uk/id/eprint/6653

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