Pablo Pinto and Boliang Zhu write:
The effects of foreign direct investment (FDI) on government corruption are conditional on the host country’s underlying economic and political climate. . . . The effect of FDI on corruption is positive in authoritarian and poor countries, and turns negative as countries develop and become more democratic.
Here’s their reasoning:
The underlying structure of the economy determines the possibility of extracting rents that could be distributed among foreign investors and the incumbent. Political development, on the other hand, determines the level of accountability of the incumbent, and creates a check on the incumbent’s ability to appropriate those rents, and the probability of getting caught and sanctioned for engaging in corrupt behavior. Hence, we [Pinto and Zhu] argue, FDI will be associated with higher corruption levels in political and economic environments with restricted competition. In more competitive political systems with diversi fied economies, on the other hand, FDI inflows are likely to reduce the ability of the incumbent to engage in corrupt behavior.
This looks important! I don’t have it in me right now to evaluate their methods, but I do have some quick comments:
– Remove all the tables. Convert to figures as necessary.
– In Figures 1 and 2, ditch the dots, and use mix of upper and lower case rather than ugly 3-letter upper-case abbreviations. For example, in Fig 1, “BEL” is Belgium? If so, why not write “Belgium” (or, if you want, “Bel”)? And so forth. If there are too many countries to fit on one plot, you can make four little plots corresponding to four different regions of the world. This is particularly ridiculous in the heading of Figure 4.
– x and y-axes should start at 0 and have reasonable labels. For example, in Fig 2, start the x-axis at 0 and label it at 0, 5, 10, rather than the hard-to-read 2,4,6,etc. And make the y-axes on the 2 figures consistent. (I recommend 0, 25, 50).
– You need better figure captions. For example, in figure 2, what are the units? Inflation-adjusted 2006 dollars? Please tell us!
– And what about the caption for Figure 5? Please give a sentence in the figure caption explaining what you’re showing in the figure.
– I don’t know what Figure 6 is trying to do, but my guess that the paper would be stronger if it were removed.
– Rotate Figure 7 ninety degrees. It’s hurting my neck when I try to read it. Also make a longer caption, and please combine the captions at the top and bottom of the figure! One long caption is much better than two short ones! Finally, do something about the wacky labels on the y-axes.
– Figure 8 needs a longer caption. What are you trying to say here?
– The color in Figure 9 is gratuitious. Also this sort of graph is much much more convincing if you can throw some raw data in as well. And ditch the dotted lines. You can mention the standard error in the figure caption (again, combine the captions above and below the graphs).
– Figures 10 and 11 look like they’re important. Here are some suggestions. Put these together, in two columns of three plots. Explain the dotted and solid lines in the figure caption, not in tiny boxes in the little figures. Get rid of the dots, label the countries better etc (as I’ve already said). Explain these values in real terms, not in mysterious numbers such as “Ln GDP per capita” (huh?) or “Democracy=8.46” (???). Take pity on readers such as myself who start with the figures!
P.S. They thank me for helpful comments. I can’t remember ever discussing this project with them! Maybe I gave them some advice on instrumental variables?