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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 School of Economics and Political Science, 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
Library of Congress subject classification: H Social Sciences > HG Finance
J Political Science > JA Political science (General)
Journal of Economic Literature Classification System: 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
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Departments > International Relations
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 25
Date Deposited: 08 Jul 2008 09:04
URL: http://eprints.lse.ac.uk/6653/

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