Political and economic determinants of private investment

Quan V. Le
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Quan V. Le: Seattle University, Seattle, USA, Postal: Seattle University, Seattle, USA

Journal of International Development, 2004, vol. 16, issue 4, 589-604

Abstract: This paper presents empirical evidence that links private investment to rate of return differential, risk aversion, and several types of political and economic risk. Estimating private investment equation for a panel of 25 developing countries over 21 years yields the following results: (i) socio-political instability characterized by nonviolent protests promotes private investment while violent uprisings hinder private investment; (ii) regime change instability characterized by constitutional government change promotes private investment while unconstitutional government change hinders private investment; and (iii) policy uncertainty characterized by variability of contract enforcement rights promotes private investment while variability of government political capacity hinders private investment. Copyright © 2004 John Wiley & Sons, Ltd.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:16:y:2004:i:4:p:589-604

DOI: 10.1002/jid.1109

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