IESET.
Hypotheses·institutional quality·expropriation_risk_investment_horizon

Across emerging-market and developing economies 1990-2020, higher expropriation risk — measured by ICRG expropriation risk index, Heritage investment-freedom score, and political-risk ratings — predicts shorter investment horizons (higher share of short-term investment, lower share of structures and machinery) and lower capital intensity in tradable sectors.

The pre-registered claim is that a one-standard-deviation increase in expropriation risk is associated with at least a 3-percentage-point reduction in the structures-and-machinery share of investment and at least a 5-percentage-point reduction in the capital-labour ratio in manufacturing, after controlling for initial income, financial development, and country fixed effects.

PARTIALengine/runs/expropriation_risk_investment_horizon

PARTIAL — coef=-3.637, p=0.231 (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=-3.637, p=0.231 (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 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
  • Expropriation risk index
  • Icrg expropriation risk
What we checked
  • Structures machinery share investment
  • Capital labour ratio manufacturing
  • Foreign investment short term share
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

8 input datasets, 2 unresolved missing series, provenance status: incomplete.

Results

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

Pre-registration

registration ordering unverified
first-spec commit 4c8ce8e · 2026-07-18T22:11:21Z
run generated · 2026-06-29T17:53:18Z
Run timestamp predates this path's first git-add commit (rebase, rename, or pre-git local run). Spec hash is still the path's first-add commit — not repository HEAD — but ordering is not a clean pre-registration proof.

Across emerging-market and developing economies 1990-2020, higher expropriation risk — measured by ICRG expropriation risk index, Heritage investment-freedom score, and political-risk ratings — predicts shorter investment horizons (higher share of short-term investment, lower share of structures and machinery) and lower capital intensity in tradable sectors. The pre-registered claim is that a one-standard-deviation increase in expropriation risk is associated with at least a 3-percentage-point reduction in the structures-and-machinery share of investment and at least a 5-percentage-point reduction in the capital-labour ratio in manufacturing, after controlling for initial income, financial development, and country fixed effects.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the coefficient on expropriation risk is not negative and significant at p<0.05 on structures-machinery share, OR (b) the coefficient is not negative and significant at p<0.05 on capital-labour ratio, OR (c) the implied effect of a one-SD increase in risk on structures-machinery share is below 1.5 percentage points. A "risk doesn't matter" reading wins if both coefficients are insignificant; a "reverse causation" reading wins if the coefficient is positive (richer countries invest more in structures and also have lower risk, but within-country changes flip the sign).

formal test & threshold
test:      panel_fe_expropriation_risk_on_investment_horizon_and_capital_intensity
threshold: panel_FE_beta(expropriation_risk → structures_machinery_share) < 0 at p<0.05 AND panel_FE_beta(expropriation_risk → capital_labour_ratio) < 0 at p<0.05 AND implied_effect_per_1sd_risk_on_structures_share >= 1.5 pp

Method

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

Panel FE with investment-horizon and capital-intensity outcomes on expropriation-risk index. Country FE absorb persistent cross-country differences. Identification from within-country changes in political risk (e.g. Venezuela pre/post Chávez, Zimbabwe pre/post land reform, Russia pre/post Yukos). Event- study around expropriation episodes as robustness. Instrument: commodity-price volatility × resource dependence as exogenous shock to expropriation risk.

Data

VariableSourceTransform
structures_machinery_share_investment
outcome
world_bank_wdi:NE.GDI.FTOT.ZStier 2
derived_share
capital_labour_ratio_manufacturing
outcome
unido:capital_per_worker_manufacturingtier 5
log
fdi_short_term_share
outcome
world_bank_wdi:BX.KLT.DINV.WD.GD.ZStier 2
derived
expropriation_risk_index
treatment
constructed:0.5×icrg:expropriation_risk + 0.3×heritage_efw:investment_freedom + 0.2×fraser_efw:capital_controlstier 5
level
icrg_expropriation_risk
treatment
icrg:expropriation_risktier 5
level
heritage_investment_freedom
treatment
heritage_ief:investment_freedomtier 4
level
log_initial_gdp_pc
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
private_credit_share_gdp
control
world_bank_wdi:FS.AST.PRVT.GD.ZStier 2
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
rule_of_law
control
wgi:RL.ESTtier 4
level
natural_resource_rents
control
world_bank_wdi:NY.GDP.TOTL.RT.ZStier 2
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — expropriation_risk_investment_horizon

Verdict: PARTIAL — coef=-3.637, p=0.231 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: Across emerging-market and developing economies 1990-2020, higher expropriation risk — measured by ICRG expropriation risk index, Heritage investment-freedom score, and political-risk ratings — predicts shorter investment horizons (higher share of short-term investment, lower share of structures and machinery) and lower capital intensity in tradable sectors. The pre-registered claim is that a one-standard-deviation increase in expropriation risk is associated with at least a 3-percentage-point reduction in the structures-and-machinery share of investment and at least a 5-percentage-point reduction in the capital-labour ratio in manufacturing, after controlling for initial income, financial development, and country fixed effects.
  • Falsification rule: Not supported if (a) the coefficient on expropriation risk is not negative and significant at p<0.05 on structures-machinery share, OR (b) the coefficient is not negative and significant at p<0.05 on capital-labour ratio, OR (c) the implied effect of a one-SD increase in risk on structures-machinery share is below 1.5 percentage points. A "risk doesn't matter" reading wins if both coefficients are insignificant; a "reverse causation" reading wins if the coefficient is positive (richer countries invest more in structures and also have lower risk, but within-country changes flip the sign).
  • Falsification test: panel_fe_expropriation_risk_on_investment_horizon_and_capital_intensity

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): -3.637
  • Std error: 3.035
  • p-value: 0.231
  • Observations: 582, countries: 31
  • Within R²: -0.0194
  • Fixed effects: entity=True, time=True
  • Clustering: country

Variables resolved

  • world_bank_wdi:NE.GDI.FTOT.ZS → structures_machinery_share_investment (outcome, publisher=world_bank_wdi, n=9870)
  • world_bank_wdi:BX.KLT.DINV.WD.GD.ZS → fdi_short_term_share (outcome, publisher=world_bank_wdi, n=9936)
  • constructed: 0.5×icrg:expropriation_risk + 0.3×heritage_efw:investment_freedom + 0.2×fraser_efw:capital_controls → expropriation_risk_index (treatment, publisher=expropriation_risk_index, n=1147)
  • heritage_efw:investment_freedom → heritage_investment_freedom (treatment, publisher=heritage_ief, n=528)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_initial_gdp_pc (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:FS.AST.PRVT.GD.ZS → private_credit_share_gdp (controls, publisher=world_bank_wdi, n=9562)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • wgi:RL.EST → rule_of_law (controls, publisher=wgi, n=5296)
  • world_bank_wdi:NY.GDP.TOTL.RT.ZS → natural_resource_rents (controls, publisher=world_bank_wdi, n=11504)

Variables missing data

  • unido:capital_per_worker_manufacturing (outcome, name=capital_labour_ratio_manufacturing) — vintage not on disk
  • icrg:expropriation_risk (treatment, name=icrg_expropriation_risk) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:53:18+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

ICRG expropriation risk has limited coverage (approx. 140 countries) and begins in 1984. Heritage investment freedom provides broader coverage from 1995. UNIDO capital-per-worker data is patchy; manufacturing capital-intensity from national accounts is a lower-quality substitute.

Authored framework. Read the transparency note.