Political and economic determinants of private investment
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.
Volume (Year): 16 (2004)
Issue (Month): 4 ()
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