Media Freedom, Socio-Political Stability and Investment
32 Pages Posted: 29 May 2011
Date Written: May 29, 2011
Using a panel of 138 countries over 1994-2005 we identify a channel through which a media free from government control promotes domestic investment. We hypothesize that a free media may enhance socio-political stability creating a favorable investment climate that attracts investment. A simultaneous equation model where investment and socio-political stability are jointly determined tests this hypothesis. The method of principal components is applied to various components of socio-political stability to generate a socio-political stability index. Media freedom may promote socio-political stability by making the government more people-oriented and socio-political stability provides a favorable business climate which in turn promotes investment.
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