IESET.
Hypotheses·institutional quality·contract_enforcement_fdi_productivity_spillovers

Across emerging-market and developing economies 1990-2020, stronger contract enforcement — measured by years to resolve a commercial dispute, contract-enforcement index, and legal-origin dummies — predicts whether foreign-direct-investment inflows produce productivity spillovers to domestic firms rather than enclave effects.

The pre-registered claim is that the correlation between FDI inflows and subsequent domestic-firm TFP growth is positive and significant at p<0.05 only in countries with above-median contract enforcement, and is insignificant or negative in countries with below-median enforcement.

SUPPORTEDengine/runs/contract_enforcement_fdi_productivity_spillovers

SUPPORTED — coef=+0.1145 (sign matches claim +), p=0.0196

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefNeeds review

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 data clearly moved in the predicted direction. coef=+0.1145 (sign matches claim +), p=0.0196

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 37 country or place units from 1990 to 2020, using a panel fe design, with fixed effects for country and year.

what was measured
What changed
  • Contract enforcement rule of law proxy
  • Contract enforcement index
What we checked
  • Domestic firm productivity growth
  • Aggregate productivity growth
  • Foreign investment spillover proxy
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

7 input datasets, 5 unresolved missing series, provenance status: incomplete.

Results

engine/runs/contract_enforcement_fdi_productivity_spillovers
1007550250199020052020CHNINDIDNBRAMEXARGCOL
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show domestic_firm_tfp_growth across 37 sampled countries over 1990–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for contract_enforcement_fdi_productivity_spillovers. Published chart will be generated from engine/runs/contract_enforcement_fdi_productivity_spillovers/chart_data.json.

Who has skin in the game — schools predicting on this

9 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Austrian Business Cycle Theory (ABCT)wins if MIXEDpartial/no-callChicago School Monetarismwins if MIXEDpartial/no-callClassical Liberalwins if MIXEDpartial/no-callStructuralist / Developmentalistwins if SUPPORTEDschool supportedEmpirical Pragmatist (the framework's house position)wins if SUPPORTEDschool supportedNew Institutional Economicswins if SUPPORTEDschool supportedNew Keynesian (mainstream synthesis)wins if SUPPORTEDschool supportedOrdoliberalism (Freiburg School)wins if SUPPORTEDschool supportedSocial Democraticwins if SUPPORTEDschool supported

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z
run generated · 2026-06-29T17:53:17Z

Across emerging-market and developing economies 1990-2020, stronger contract enforcement — measured by years to resolve a commercial dispute, contract-enforcement index, and legal-origin dummies — predicts whether foreign-direct-investment inflows produce productivity spillovers to domestic firms rather than enclave effects. The pre-registered claim is that the correlation between FDI inflows and subsequent domestic-firm TFP growth is positive and significant at p<0.05 only in countries with above-median contract enforcement, and is insignificant or negative in countries with below-median enforcement.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the interaction coefficient is not positive and significant at p<0.05, OR (b) the marginal effect of FDI on domestic TFP is positive and significant even in below-median contract-enforcement countries (no threshold), OR (c) the result is driven entirely by common-law countries (legal-origin confound rather than enforcement per se). An "FDI always helps" reading wins if (b) holds; a "institutions don't matter for FDI" reading wins if the interaction is insignificant and FDI main effect dominates.

formal test & threshold
test:      panel_fe_fdi_contract_enforcement_interaction_on_domestic_tfp
threshold: panel_FE_beta(FDI × contract_enforcement) > 0 at p<0.05 AND marginal_effect_FDI_at_below_median_enforcement NOT > 0 at p<0.10 AND result robust to excluding_common_law_countries at p<0.10

Method

Template
panel_fe
Fixed effects
country, year
Clustering
country
Sample
37 countries · 1990 – 2020
Evidence type
associational

Panel FE with interaction: FDI inflows × contract enforcement. Primary test: sign and significance of interaction on domestic- firm TFP growth. Sub-sample analysis: above-median vs below- median contract enforcement. Robustness: use legal-origin dummies instead of Doing Business enforcement measure; IV using colonial-legal-origin as instrument for contract enforcement.

Data

VariableSourceTransform
domestic_firm_tfp_growth
outcome
constructed:tfp_growth_domestic_firms_from_enterprise_surveystier 5
level
aggregate_tfp_growth
outcome
pwt:rtfpnatier 3
log_diff_5yr
fdi_spillover_proxy
outcome
constructed:correlation_fdi_inflows_and_domestic_productivity_growthtier 5
rolling_5yr_correlation
contract_enforcement_rule_of_law_proxy
treatment
wgi:RL.ESTtier 4
level
contract_enforcement_index
treatment
world_bank_wdi:IC.LGL.DURStier 2
composite
years_to_enforce_contract
treatment
world_bank_wdi:IC.LGL.DURStier 2
level
legal_origin_common_law
treatment
constructed:la_porta_legal_origin_dummytier 5
indicator
log_initial_gdp_pc
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
human_capital_index
control
pwt:hctier 3
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
financial_development
control
world_bank_wdi:FS.AST.PRVT.GD.ZStier 2
level
infrastructure_quality
control
wgi:GE.ESTtier 4
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — contract_enforcement_fdi_productivity_spillovers

Verdict: SUPPORTED — coef=+0.1145 (sign matches claim +), p=0.0196

Pre-registration

  • Claim: Across emerging-market and developing economies 1990-2020, stronger contract enforcement — measured by years to resolve a commercial dispute, contract-enforcement index, and legal-origin dummies — predicts whether foreign-direct-investment inflows produce productivity spillovers to domestic firms rather than enclave effects. The pre-registered claim is that the correlation between FDI inflows and subsequent domestic-firm TFP growth is positive and significant at p<0.05 only in countries with above-median contract enforcement, and is insignificant or negative in countries with below-median enforcement.
  • Falsification rule: Not supported if (a) the interaction coefficient is not positive and significant at p<0.05, OR (b) the marginal effect of FDI on domestic TFP is positive and significant even in below-median contract-enforcement countries (no threshold), OR (c) the result is driven entirely by common-law countries (legal-origin confound rather than enforcement per se). An "FDI always helps" reading wins if (b) holds; a "institutions don't matter for FDI" reading wins if the interaction is insignificant and FDI main effect dominates.
  • Falsification test: panel_fe_fdi_contract_enforcement_interaction_on_domestic_tfp

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): +0.1145
  • Std error: 0.0489
  • p-value: 0.0196
  • Observations: 511, countries: 29
  • Within R²: 0.512
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • pwt:rtfpna → aggregate_tfp_growth (outcome, publisher=pwt, n=6407)
  • wgi:RL.EST → contract_enforcement_rule_of_law_proxy (treatment, publisher=wgi, n=5296)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_initial_gdp_pc (controls, publisher=world_bank_wdi, n=12104)
  • pwt:hc → human_capital_index (controls, publisher=pwt, n=8637)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • world_bank_wdi:FS.AST.PRVT.GD.ZS → financial_development (controls, publisher=world_bank_wdi, n=9562)
  • wgi:GE.EST → infrastructure_quality (controls, publisher=wgi, n=5168)

Variables missing data

  • constructed: tfp_growth_domestic_firms_from_enterprise_surveys (outcome, name=domestic_firm_tfp_growth) — vintage not on disk
  • constructed: correlation_fdi_inflows_and_domestic_productivity_growth (outcome, name=fdi_spillover_proxy) — vintage not on disk
  • world_bank_wdi:IC.LGL.DURS (treatment, name=contract_enforcement_index) — vintage not on disk
  • world_bank_wdi:IC.LGL.DURS (treatment, name=years_to_enforce_contract) — vintage not on disk
  • constructed: la_porta_legal_origin_dummy (treatment, name=legal_origin_common_law) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:53:17+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

Domestic-firm TFP from WB Enterprise Surveys is cross-sectional with limited panel dimension. Aggregate TFP from PWT is a lower- quality substitute. Doing Business contract-enforcement data starts in 2003; earlier years rely on backfilled legal-origin proxies.

Authored framework. Read the transparency note.