IESET.
Hypotheses·institutional quality·classical_property_rights_security_fdi_premium_panel

Across countries 2000-2022, higher WGI Political Stability (PV.EST) and Rule of Law (RL.EST) jointly predict higher subsequent FDI inflows as a share of GDP, conditional on initial income, market size, openness, and natural-resource rents.

The Smithian / classical-liberal claim is that secure property rights and predictable adjudication are the binding constraints on the marginal foreign-investor decision to commit irreversible capital; the test is a panel-FE regression of 5-year-forward mean FDI inflows on a composite property-rights-security index built from WGI PV and RL.

PARTIALengine/runs/classical_property_rights_security_fdi_premium_panel

PARTIAL — coef=+1.207, p=0.158 (above α=0.05); direction inconclusive

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The evidence is suggestive but not decisive. coef=+1.207, p=0.158 (above α=0.05); direction inconclusive

why it matters

This matters because institutional quality claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 60 country or place units from 2000 to 2022, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Wgi political stability
  • Wgi rule of law
What we checked
  • Foreign investment net inflows pct income 5yr forward
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

0 input datasets, 0 unresolved missing series, provenance status: no input vintages recorded.

Results

engine/runs/classical_property_rights_security_fdi_premium_panel
1007550250200020112022ALBARGAUSAUTBELBGDBRA
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show fdi_net_inflows_pct_gdp_5yr_forward across 60 sampled countries over 2000–2022.
The shapes above are stylised — none of the lines are real data.
Placeholder for classical_property_rights_security_fdi_premium_panel. Published chart will be generated from engine/runs/classical_property_rights_security_fdi_premium_panel/chart_data.json.

Pre-registration

pre-registered
first-spec commit 098ce96 · 2026-04-30T12:57:33Z
run generated · 2026-06-29T17:53:16Z

Across countries 2000-2022, higher WGI Political Stability (PV.EST) and Rule of Law (RL.EST) jointly predict higher subsequent FDI inflows as a share of GDP, conditional on initial income, market size, openness, and natural-resource rents. The Smithian / classical-liberal claim is that secure property rights and predictable adjudication are the binding constraints on the marginal foreign-investor decision to commit irreversible capital; the test is a panel-FE regression of 5-year-forward mean FDI inflows on a composite property-rights-security index built from WGI PV and RL.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

SUPPORTED if both (a) panel-FE coefficient on the composite property-rights-security index is positive and significant at p<0.05 on 5-year-forward FDI/GDP, AND (b) the bivariate cross- sectional country-mean regression also yields a positive coefficient at p<0.05. PARTIAL if only one of the two holds. REFUTED if both are insignificant or the panel-FE coefficient is wrong-signed at p<0.05. INFORMATIVE: the coefficient should be larger (in magnitude) for low-resource-rent countries — extractive-resource-rich countries' FDI is partly insensitive to property-rights variation because rent capture dominates.

formal test & threshold
test:      panel_fe_composite_pv_rl_on_fdi_with_cross_section_robustness
threshold: PRIMARY: panel_FE_beta(composite) > 0 at p<0.05 AND cross_section_beta(composite_mean) > 0 at p<0.05. INFORMATIVE: |coefficient| larger in resource-rents-below-median sub-sample.

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
60 countries · 2000 – 2022
Evidence type
associational

Two-way fixed-effects panel with standard errors clustered by country. Identification from within-country variation in WGI PV/RL. Robustness: replicate with each WGI subcomponent separately and with the composite. v2 could exploit Polity5 or V-Dem regime-transition events as instruments.

Data

VariableSourceTransform
fdi_net_inflows_pct_gdp_5yr_forward
outcome
world_bank_wdi:BX.KLT.DINV.WD.GD.ZStier 2
5yr_forward_mean
wgi_political_stability
treatment
wgi:PV.ESTtier 4
level
wgi_rule_of_law
treatment
wgi:RL.ESTtier 4
level
property_rights_security_composite
treatment
constructed:0.5 × wgi:PV.EST + 0.5 × wgi:RL.ESTtier 5
composite
initial_log_gdp_pc
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log_level_at_block_start
log_population_market_size
control
world_bank_wdi:SP.POP.TOTLtier 2
log_level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
natural_resource_rents
control
world_bank_wdi:NY.GDP.TOTL.RT.ZStier 2
level
corp_tax_rate
control
world_bank_wdi:IC.TAX.TOTL.CP.ZStier 2
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — classical_property_rights_security_fdi_premium_panel

Verdict: PARTIAL — coef=+1.207, p=0.158 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: Across countries 2000-2022, higher WGI Political Stability (PV.EST) and Rule of Law (RL.EST) jointly predict higher subsequent FDI inflows as a share of GDP, conditional on initial income, market size, openness, and natural-resource rents. The Smithian / classical-liberal claim is that secure property rights and predictable adjudication are the binding constraints on the marginal foreign-investor decision to commit irreversible capital; the test is a panel-FE regression of 5-year-forward mean FDI inflows on a composite property-rights-security index built from WGI PV and RL.
  • Falsification rule: SUPPORTED if both (a) panel-FE coefficient on the composite property-rights-security index is positive and significant at p<0.05 on 5-year-forward FDI/GDP, AND (b) the bivariate cross- sectional country-mean regression also yields a positive coefficient at p<0.05. PARTIAL if only one of the two holds. REFUTED if both are insignificant or the panel-FE coefficient is wrong-signed at p<0.05. INFORMATIVE: the coefficient should be larger (in magnitude) for low-resource-rent countries — extractive-resource-rich countries' FDI is partly insensitive to property-rights variation because rent capture dominates.
  • Falsification test: panel_fe_composite_pv_rl_on_fdi_with_cross_section_robustness

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): +1.207
  • Std error: 0.8549
  • p-value: 0.158
  • Observations: 1040, countries: 50
  • Within R²: 0.0018
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • world_bank_wdi:BX.KLT.DINV.WD.GD.ZS → fdi_net_inflows_pct_gdp_5yr_forward (outcome, publisher=world_bank_wdi, n=9936)
  • wgi:PV.EST → wgi_political_stability (treatment, publisher=wgi, n=5255)
  • wgi:RL.EST → wgi_rule_of_law (treatment, publisher=wgi, n=5296)
  • constructed: 0.5 × wgi:PV.EST + 0.5 × wgi:RL.EST → property_rights_security_composite (treatment, publisher=property_rights_security_composite, n=1380)
  • world_bank_wdi:NY.GDP.PCAP.KD → initial_log_gdp_pc (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:SP.POP.TOTL → log_population_market_size (controls, publisher=world_bank_wdi, n=14447)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • world_bank_wdi:NY.GDP.TOTL.RT.ZS → natural_resource_rents (controls, publisher=world_bank_wdi, n=11504)

Variables missing data

  • world_bank_wdi:IC.TAX.TOTL.CP.ZS (controls, name=corp_tax_rate) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:53:16+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Smith's "Wealth of Nations" Book V argued that the security of property is the pre-condition for accumulation. Modern formal expression: AJR institutional growth literature, North-Weingast contract-enforcement-and-investment line. The composite PV+RL index is the registered-publisher proxy for the broader concept.

Authored framework. Read the transparency note.