Does Partisan Conflict Deter FDI Inflows to the Us?

40 Pages Posted: 13 Jun 2016 Last revised: 29 Jun 2016

See all articles by Marina Azzimonti

Marina Azzimonti

SUNY Stony Brook - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2016

Abstract

I analyze how partisan conflict about trade policy affects foreign direct investment flows to the US using a novel indicator, the Trade Partisan Conflict Index (TPCI). Partisan conflict is relevant for the evolution of cross-border capital flows because the expected returns on investment projects are less predictable when the timing, size, and composition of trade policy is uncertain. The trade partisan conflict index tracks the evolution of political disagreement among policymakers on topics such as tariffs, subsidies, and trade agreements as reported by the media. Using data from 1985 to 2016, I show that an innovation of the PCI is associated with a significant decline in FDI flows to the US. The effect is also present when disaggregated (annual) data from a panel of parent countries is considered instead.

Suggested Citation

Azzimonti, Marina, Does Partisan Conflict Deter FDI Inflows to the Us? (June 2016). NBER Working Paper No. w22336, Available at SSRN: https://ssrn.com/abstract=2794782

Marina Azzimonti (Contact Author)

SUNY Stony Brook - Department of Economics ( email )

NY 11733-4384
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
150
PlumX Metrics