Private investment and political institutions

Research output: Contribution to journalArticle

Abstract

Recent research has demonstrated a negative link between macroeconomic and political uncertainty and levels of private investment across countries. This raises the question whether certain types of government institutions might help reduce this uncertainty. North and Weingast (1989) propose that political institutions characterized by checks and balances can have beneficial effects on investment by allowing governments to credibly commit not to engage in ex post opportunism with respect to investors. In this paper 1 develop and test a modified version of their hypothesis, suggesting that checks and balances, on average, improve possibilities for commitment, but that they are not a necessary condition for doing so. Results of heteroskedastic regression and quantile regression estimates strongly support this proposition.

Original languageEnglish (US)
Pages (from-to)41-63
Number of pages23
JournalEconomics and Politics
Volume14
Issue number1
DOIs
StatePublished - 2002

ASJC Scopus subject areas

  • Economics and Econometrics

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