Notes On The And Flow Data

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2 DATA AND OPERATIONALIZATION Tostudy the impactofpoliticalaffinity onFDI,I employ the datafrom UNCTAD,whichrecord bilateral FDI stock and flow data for more than 200 countries from 2001 to 2012. Since FDI flow data can be a poor conceptual choice for answering political questions (Kerner, 2014; Sorens and Ruger, 2015; Benacek et al., 2014), I choose to use only the stock data. One possible drawback for UNCTAD data is its compilation by reports from different countries, which have varied reporting rules and rigorousness. As a result, it may have serious measurement errors or substantial missing values. However, this weakness appears to plague the other two major FDI data resources (IMF and OECD) as well. 1 In addition, since biased or…show more content…
This choice is mainly out of convenience. It is also workable to use the outstock data instead. The interpretation will be similar. 2.1 POLITICAL AFFINITY Admittedly there is no perfect measure for two countries’ political closeness. To somehow proxy this measurement, I use the ideal points compiled by Erik Voeten and colleagues from the UN general assembly roll-call voting data. 3 This dataset has ideal point estimates for countries from 1946 to 2014. To measure political affinity for a given country pair, I take the absolute value of the difference between their ideal points and code them as "idealPoint". In this regard, the smaller value the idealPoint variable is, they closer is the country pair’s relationship. 2.2 CONTROLS As mentioned before, to somehow mitigate the reporting country’s biasness, I need to apply controls over the country’s general FDI volume. More importantly, the volume of FDI stock in a certain country is substantially affected by the attractiveness of the destination and the financial caliber of the donor country. In this regard, I tally the total volume of both the instock FDI for the recipient country and the outstock FDI for the donor country. The former is used as a proxy for the destination’s investment attractiveness and the latter for the donor’s financial caliber. This way I can sidestep the use of other economic controls and focus on studying how political affinity affect FDI. 3This dataset can be downloaded from Harvard.
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