Why Do Democracies Attract More or Less Foreign Direct Investment? A Metaregression Analysis

Abstract

A large body of research examines the relationship between democracy and foreign direct investment (FDI). Scholars offer numerous arguments about why democratic institutions encourage or discourage FDI. Yet, almost all statistical work examines whether democracies receive more or less FDI than nondemocracies. Direct evidence on the underlying theoretical mechanisms that might account for such variation remains scant. We perform a metaregression analysis to test whether proposed mechanisms are consistent with observable evidence from previous studies or not. Our sample includes 229 model estimates from forty prior studies. We reach three major findings with respect to theoretical mechanisms, FDI measurement, and publication bias. Our research demonstrates that metaregression provides a useful tool for adjudicating theoretical arguments and evaluating publication bias, especially when the accumulated literature presents contradictory findings.

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