yield curves and international equity returns abstract this paper examines empirical evidence on the international transmission of shocks to financial asset markets the relationships between yield curves and risk premiums of stocks for eight industrialized countries are examined only the stocks of the three largest economies germany japan and the usa show negative risk premiums during periods preceded by the inverted yield curves of their respective government bonds this is not the case for stocks of the five smaller countries in the sample however four of the five smaller countries have negative risk premiums in periods preceded by inverted german or us yield curves this is consistent with the view that a world risk factor captured by major country yield curves affects the pricing of assets in smaller economies the consumption capm is unable to explain the phenomenon of the negative risk premiums in almost all cases the conditional covariance between consumption growth and the risk premiums is statistically indifferent from zero

hegemony imperialism and the profitability of foreign investments socialists at the turn of the century explained modern imperialism as an attempt to escape the crisis of monopoly capitalism super profits that could be secured in the periphery according to lenin were necessary to offset declining rates of return in the advanced economies today radical theorists stress the role of the multinational corporations in accounting for neocolonialism if great national power does produce material benefits for foreign investors this should be apparent in two cases the experience of british capitalists in the high age of imperialism 1870 1913 and the operations of u s multinational corporations abroad after world war ii but rates of return on foreign investments have not been significantly different in the developed and less developed regions of the world a finding that is relevant not only for theories of imperialism but also for understanding development and modernization the operation of the multinational corporation and international capital markets

foreign actors and intellectual property protection regulations in developing countries international agreements and institutions affect innovation in developing countries we analyze the impact of advanced country multinational enterprises amnes and supranational organizations on the regulatory adoption of global intellectual property protection standards in particular we investigate 60 developing countries that signed the trade relate aspects of intellectual property rights trips agreement of the world trade organization in 1994 our empirical findings show that a greater involvement of amnes in the domestic innovation systems of developing countries results in more stringent trips adoption and convergence to advanced country ip protection standards this relationship is positively moderated by country dependency on supranational organizations such as the international monetary fund this analysis contributes to the literature on institutional change and institutional voids it provides insights into the influence of external actors on the underlying change processes

dependency disarticulation and denominator effects another look at foreign capital penetration less developed countries desparately need capital to develop but countries dependent on foreign capital face slower economic growth higher income inequality and possibly impaired domestic capital formation these conclusions emerge from a reassessment of glenn firebaugh s broad critique of capital dependency research which exposed an important error in earlier studies the solution charts new theoreticall ground by factoring dependency effects into the differential productivity of foreign and domestic investment and the negative externalities from foreign capital penetration the revised formulation is applied to cross national analyses of economic growth decapitalization and income inequality the findings consistently support capital dependency theory

international investment and colonial control a new interpretation the impact of economic factors on colonial imperialism in the late nineteenth century has long been a topic of debate this article examines the expected relationship between different forms of international investment and different patterns of political ties between developed and developing countries drawing on the literature on relational contracts and collective action it argues that direct colonial control was likely to be associated with cross border investments whose rents were particularly easy to seize or protect and whose protection did not require multilateral action where such rents were difficult to seize or protect unilaterally colonialism is expected to be less likely the most common example of the former sort of investment is primary raw materials or agricultural investment of the latter multinational manufacturing affiliates the argument is weighed against both a survey of the qualitative evidence and some simple quantitative evaluations the approach also has potential applications to more general problems of international conflict and cooperation

determinants of foreign direct investment in taiwan an alternative approach with time series data abstract regression analysis using level variables is a popular technique for identifying the demand side determinants of foreign direct investment while the technique is justifiable in analyses with cross country data it is not with time series data from a single country the lack of a logical relationship between the dependent and explanatory variables in an analysis using time series data usually leads to spurious and misleading results with an alternative specification fdi data of taiwan were utilized to highlight this problem contrary to conventional wisdom fdi in taiwan was found to be probably supply side determined

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

social pacts and inflation control in new democracies the impact of wildcat cooperation in argentina and uruguay this article examines both the advocacy of social pacts in new democracies and the common assumption that labor presents the chief obstacle to social pacts game theory is used heuristically to demonstrate that in slack labor markets business will be more opposed to pacts than labor because individual workers will make more concessions at the plant level than labor confederation leaders will offer in peak level negotiations an examination of wage bargaining in the first 3 years of the new argentine and uruguayan democracies supports this hypothesis the article closes with a reexamination of the wage centered debate on inflation in contemporary new democracies

comparative democracy the economic development thesis in comparative politics an established finding that economic development fosters democratic performance has recently come under challenge we counter this challenge with a dynamic pooled time series analysis of a major but neglected data set from 131 nations the final generalized least squares autoregressive moving averages estimates n 2 096 appear robust and indicate strong economic development effects dependent in part on the nation s position in the world system for the first time rather hard evidence is offered on the causal relationship between economics and democracy according to granger tests economic development causes democracy but democracy does not cause economic development overall the various tests would seem to advance sharply the modeling of democratic performance

reversal of fortunes democratic institutions and foreign direct investment inflows to developing countries does increased democracy promote or jeopardize foreign direct investment fdi inflows to less developed countries we argue that democratic institutions have conflicting effects on fdi inflows on the one hand democratic institutions hinder fdi inflows by limiting the oligopolistic or monopolistic behaviors of multinational enterprises facilitating indigenous businesses pursuit of protection from foreign capital and constraining host governments ability to offer generous financial and fiscal incentives to foreign investors on the other hand democratic institutions promote fdi inflows because they tend to ensure more credible property rights protection reducing risks and transaction costs for foreign investors hence the net effect of democracy on fdi inflows is contingent on the relative strength of these two competing forces our argument reconciles conflicting theoretical expectations in the existing literature empirical analyses of fifty three developing countries from 1982 to 1995 substantiate our claims we find that both property rights protection and democracy related property rights protection encourage fdi inflows after controlling for their positive effect through property rights protection democratic institutions reduce fdi inflows these results are robust against alternative model specifications statistical estimators and variable measurements

economic openness democracy and income inequality an empirical analysis scholars have studied effects of economic openness and democracy on national income inequality in two literatures in democracy studies scholars agree democracy reduces inequality but empirical evidence is ambiguous in globalization studies effects of economic openness on inequality are debated but have not been rigorously examined this article is the first systematic statistical study of the effects of both economic openness and democracy on income inequality these effects need to be studied together the authors measure national income inequality from a comprehensive gini coefficient data set economic openness is measured from trade flows foreign direct investment inflows and financial capital inflows the period studied is 1960 to 1996 the unit of analysis is a country decade and the sample includes 69 countries the authors find that democracy and trade reduce income inequality foreign direct investments increase income inequality and financial capital does not affect income inequality policy implications are discussed

does high income promote democracy the authors construct a statistical model with which to test whether the regularity that democracy is more commonly found among wealthy countries stems from a democratizing effect of high income or is due entirely to other factors such as the historical context various features of the institutional setting and simultaneity with the process of leadership change even after correcting for these many other influences the democratizing effect of income remains as a statistically significant factor promoting the emergence of democratic political institutions the authors go on to find that leaders risks of losing power rise during their time in office and that these risks are higher in more democratic countries the authors confirm the finding by burkhart and lewis beck that the democracy promoting effect of income is stronger among the european countries they suggest that high income has a more powerful democratizing effect among the southern european countries because it interacts with pressure from major trading partners to democratize this suggests a revaluation of policies designed to foster the replacement of authoritarian regimes by democratic ones through free trade

host country reforms and fdi inflows how much difference do they make summary this study examines the effects of various policies on foreign direct investment fdi flows from the perspective of the eclectic theory of international investment and hence the advantages of foreign ownership host country location and internationalization host country policies can influence fdi flows primarily through their influence on the advantages of location in the host country pooled cross section and time series data for 49 less developed countries ldcs over 1970 95 are used to examine the effects of several different types of policy institutional variables including corporate tax rates tariff rates the degree of openness to international capital flows exchange rate distortions contract enforcement nationalization risk bureaucratic delay and corruption a multivariate analysis of the effects on fdi flows of each type of policy with and without controls for other relevant determinants is conducted two different sources of fdi data are employed as well as two different measures of capital controls although there are methodological problems in estimation and especially collinearity problems and relatively severe availability constraints for some of the relevant measures the results demonstrate the relevance and importance for fdi flows of many of the policy institutional variables under study they also indicate that the results from panel methods yield results that differ rather significantly from those obtained from pure cross section analysis because of complementarity between the various elements of a healthy investment climate the effects of some policy reforms estimated from models which do not control for changes in other policies may overstate the effectiveness of individual policy reforms

intermediary asset pricing abstract we model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary intermediaries face an equity capital constraint risk premia r

boon or bane reassessing the productivity of foreign direct investment we assess the effects of foreign and domestic capital on economic growth using the latest data and better models of economic growth than those previously used we explicitly consider the role of human capital in the process of economic development we find no evidence that foreign direct investment harms the economic prospects of developing countries the flow of foreign capital from 1980 to 1991 spurred growth in gross domestic product per capita while the level of foreign stock or foreign penetration had no discernible effect indeed new foreign investment was more productive dollar for dollar than was capital from domestic sources previous suggestions that foreign investment flows are less beneficial than domestic ones were based on a misinterpretation moreover foreign direct investment stimulates investment from domestic sources consequently developing countries have no reason to eschew foreign capital as dependency theorists urge

democracy stability and dichotomies an early debate in the empirical study of political democracy concerned the measurement of democracy initial work employed dichotomous indicators and incorporated stability into political democracy measures evidence accumulated showing that this approach could adversely affect analyses particularly in the study of income inequality despite this some recent studies have renewed the flawed practices we draw upon recent work to highlight the confusion that can result when democracy and stability are confounded and the problems with dichotomous indicators we propose that stability is analytically distinct from political democracy and should be treated as such empirically and we suggest ways to estimate incremental effects of political democracy we further argue that political democracy is continuous and that measures of it should reflect this it is important that the measurement history of this construct not repeat itself

dependence on foreign investment and economic growth in the third world estimates of the extent to which third world countries have experienced slower rates of growth than those in the industrialized west since i960 indicate a weak relation between initial wealth and subsequent economic growth that follows an inverted u shape pattern while the lowest growth rates are found among the poorest countries of the third world the highest growth rates are found not in the industrialized west but in the wealthiest third world countries drawing on contending arguments associated with modernization and dependency perspectives the relationship between foreign investment and growth within the third world is examined results undermine the idea that foreign investment inhibits growth suggesting instead that flows of foreign investment may facilitate growth especially among the initially wealthier countries of the third world

the management of political risk we explore a long standing prediction in the international business literature that managers subjective perceptions of political risk not just the level of risk are important for how firms manage political risk the importance attributed to political risk by corporate executives has increased over the last 15 years and our results show that political risk is now considered more important than commodity input risk our analysis suggests that nearly 50 of firms avoid not simply reduce foreign direct investment because of political risk using a unique survey based psychometric evaluation of manager risk aversion we show that firms with risk averse executives are more likely to avoid investment in politically risky countries a key implication of behavioral models this relation is economically stronger when agency problems are more likely to be severe for example when executives are less aligned with shareholder value maximization and when executives are younger and therefore might put their personal career concerns in front of shareholders interests while numerous studies have shown that political risk affects foreign direct investment using objective measures of such risk electoral uncertainty conflicts etc our study documents that executives subjective perceptions of political risk are also important for political risk management

democracy foreign direct investment and natural resources abstract empirical studies that examine the impact of democracy on foreign direct investment fdi assume that the relationship between democracy and fdi is the same for resource exporting and non resource exporting countries this paper examines whether natural resources in host countries alter this relationship we estimate a linear dynamic panel data model using data from 112 developing countries over the period 1982 2007 we find that democracy promotes fdi if and only if the value of the share of minerals and oil in total exports is less than some critical value we identify 90 countries where an expansion of democracy may enhance fdi and 22 countries where an increase in democratization may reduce fdi we also find that the effect of democracy on fdi depends on the size and not the type of natural resources

private investment and democracy in latin america abstract this paper argues that the deterioration of latin american private investment in the 1980s may have been largely due to debt difficulties and not the concurrent wave of democratization after reviewing why more political systems may actually be conducive to investment we test an investment function for seven countries over 1973 1986 that includes traditional economic factors two debt measures and several political variables including measures of democracy worker power international monetary fund support and risk the results are quite congenial for our hypothesis under several reasonable alternative specifications for the economic determinants our democracy measure is positively signed and significant

democracy property rights and economic growth what does the global surge in democracy and capitalism portend for economic growth the shift toward popular government is predicted by some to accelerate growth by others to retard it often left out of the equation is property rights as a factor distinct from democratic rule using recent data on 59 less developed and transitional countries this article explores the relationship among institutional factors and growth in the 1980s and early 1990s democratic freedoms and property rights are associated with the dependent variable suggesting that national income in poor countries stands to gain from recent efforts to implant these institutions