Institutions, Volatility, and Investment

Timothy Besley and Hannes Mueller

Journal of the European Economic Association, 2018, vol. 16, issue 3, 604-649

Abstract: Countries with strong executive constraints have lower growth volatility but similar average growth to those with weak constraints. This paper argues that this may explain the relationship between executive constraints and inflows of foreign investment. It uses a novel dataset of Dutch sector-level investments between 1983 and 2012 to explore this issue. It formulates an economic model of investment and uses data on the mean and variance of productivity growth to explain the relationship between investment inflows and executive constraints. The model can account for the aggregate change in inflows when strong executive constraints are adopted in terms of the reduction in the volatility in productivity growth. The data and model together suggest a natural way of thinking about country-level heterogeneity in investment inflows following the adoption of strong executive constraints.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1093/jeea/jvx030 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Institutions, volatility and investment (2018)
Working Paper: Institutions, Volatility and Investment (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:16:y:2018:i:3:p:604-649.

Access Statistics for this article

Journal of the European Economic Association is currently edited by Romain Wacziarg

More articles in Journal of the European Economic Association from European Economic Association
Bibliographic data for series maintained by Oxford University Press ().