Enlightened Self-Interest: How the National Economy, Ideology, and
Anti-Americanism Influence Public Opinion on Foreign Investment
AR~cHNES
By Joyce Lawrence
Master of Pacific International Affairs
University of California, San Diego, 2008
B.S. in Business Administration
Washington University in St. Louis, 2004
OF TECHNOLOGY
AY j 2014
V3 R A
IILc)
Submitted to the MIT Department of Political Science in Partial Fulfillment of the Requirements for the
Degree of
Master of Science in Political Science
At the
Massachusetts Institute of Technology
February 2014
Massachusetts Institute of Technology. All Rights Reserved.
Signature of Author .....
.......................................
_"tV---------// ----
MIT Political Science Department
February 7, 2014
Certified by .........................
......................................................
Ben Ross Schneider
Ford International Professor of Political Science
Thesis Supervisor
Accepted by .................................................
Roger Petersen
Arthur and Ruth Sloan Professor of Political Science
Graduate Program Committee Chair
Enlightened Self-Interest: How the National Economy, Ideology, and
Anti-Americanism Influence Public Opinion on Foreign Investment
By Joyce Lawrence
Submitted to the Department of Political Science
On February 7, 2014 in Partial Fulfillment of the Requirements for the Degree of
Master of Science in Political Science
Abstract
Despite the benefits of economic globalization, popular opposition to foreign investment continues to
influence policy debates. What explains opposition to foreign investment? Standard political economy
theories suggest that support for international trade, immigration, and investment all depend on the
impact these policies have on potential earnings in the labor market. According to standard models, those
who stand to benefit economically from international exchange are expected to be more supportive than
those who will face increased competition and declining wages. An analysis of four cross-national surveys
from 57 countries provides empirical evidence that public opinion on foreign investment is not
determined by economic self-interest, but rather by evaluations of the national economy, political
ideology, and attitudes about the United States. These findings have implications for understanding the
debate over globalization policy and domestic support for further liberalization around the world.
Thesis Advisor: Ben Ross Schneider, Ford International Professor of Political Science
2
Table of Contents
1.
Introduction ..........................................................................................................................................
4
II.
Foreign Direct Investm ent in Developing Countries .......................................................................
9
Ill.
Public Opinion and Econom ic Policy Issues ..............................................................................
13
IV.
Literature Review : Public Opinion and FDI................................................................................
15
V.
Theory and Hypotheses......................................................................................................................23
VI.
Research M ethodology...................................................................................................................29
VII.
National Economic Evaluations and Support for FDI in Latin America ....................................
33
Baseline M odel: Education and Skills.................................................................................................
41
Economic Perceptions: Egocentric and Sociotropic Models of FDI Preferences ...............................
45
Nationalism, Ideology, and Country of Origin ...................................................................................
48
VIII.
Anti-Am erican Sentim ent and Attitudes on FDI........................................................................
Baseline M odel .......................................................................................................................................
52
54
Nationalism and Anti-Am erican Sentim ent...........................................................................................57
IX.
Conclusion.......................................................................................................................................61
References ..................................................................................................................................................
3
64
I.
Introduction
The growth in international flows of trade and capital in recent decades created substantial
economic growth, lifting millions out of poverty and raising the standard of living around the world. In
2011, global foreign investment inflows totaled $1.5 trillion, more than the entire economic output of
Mexico. Free movement of investment capital creates economic efficiencies by allowing investors to go
where returns are highest, and direct investment means multinational corporations (MNCs) can reach
new markets while retaining control over their operations. The host countries that receive foreign
direct investment (FDI) can experience job growth, access to new technology, and increased tax
revenues (Lipsey, 2004), but the benefits of spillovers from FDI depend on the capacity of the host
economy to absorb new skills and technology (Crespo & Fontoura, 2007). Policy barriers to foreign
investment have dropped significantly in recent years, but developing countries continue to have more
restrictions on foreign investment than developed countries (Golub, 2009). Despite a broad trend
toward the liberalization of cross-border investment, opponents of globalization continue to be a strong
political force (Rodrik, 1997; Stiglitz, 2002), and the debate about the benefits of FDI to host countries
remains an active one.1
This paper will contribute to a better understanding of how economic calculations and cultural
attitudes influence domestic support for foreign investment using cross-national analysis of public
opinion surveys. The question-What accounts for public opinion on foreign investment?-is closely
related to research on other topics in international political economy including international trade and
immigration, which benefit from a large body of research examining both economic and cultural
influences on policy preferences. However, there is relatively little research on foreign investment that
explores domestic policy preferences.
For more on the costs and benefits of FDI to host countries, see Alfaro & Charlton (2007).
4
Recent studies of the politics of foreign investment have developed a political economy model
based on the Heckscher-Ohlin model in international trade, which claims attitudes about foreign
investment are determined by the impact of FDI on labor market outcomes (Pandya, 2010, 2013; Pinto
& Pinto, 2008; Pinto, 2013). According to the factor model, individuals who are most likely to benefit
economically from increased investment (through higher wages and new employment opportunities)
will support greater openness while those whose occupations are likely to face increased competition
will oppose inward investment. In order to identify the beneficiaries of FDI, the authors rely on a simple
two-factor model of production, which assumes labor and capital are the inputs into the production
process. Countries with abundant capital should receive more capital-intensive FDI and places with
abundant labor should receive more labor-intensive FDI, according to this model. This fits the trend
over the last thirty years of industrialized economies outsourcing labor-intensive tasks like electronics
assembly and apparel manufacturing to developing countries like China and Mexico, where labor costs
are lower. The factor model is used by both Pinto and Pandya as the theoretical foundation for
explaining cross-country differences in FDI policy. The factor model is now a standard approach in
studies of the politics of FDI. However, a deeper investigation of public opinion reveals that the factor
model is flawed because it does not take into account the limitations of public opinion and reasoning on
complex economic policy issues.
In contrast to the factor model, which focuses on economic self-interest as the primary factor in
attitudes about FDI, my analysis demonstrates that public opinion about foreign investment depends on
evaluations of the broader state of the national economy and ideas about the sending country. Based
on an analysis of public opinion surveys conducted across 17 Latin American countries on political and
economic issues, I find that opposition to FDI is strongest among those who believe the national
economy is in decline regardless of their own income. A study of attitudes about FDI based on a
different sample of 57 countries shows that anti-American attitudes are a significant predictor of
5
opposition to FDI. These findings refute the existing political economy theory and offer evidence that
supports an alternative theory of public opinion that is driven by heuristics rather than economic selfinterest calculations. Distinguishing between the two models is important because they lead to
different implications for who will support increased liberalization of foreign investment in developing
countries.
Early empirical research on the politics of globalization found some support for the link between
labor market outcomes and attitudes about globalization in developed countries, but also produced a
puzzle about responses in developing countries. Survey analysis of trade policy preferences in the
United States shows that those with higher skills, as measured by education, tend to support increased
international trade (Scheve & Slaughter, 2001). While there is a significant relationship between skills
and positions on globalization, this factor explains relatively little of the overall variation. Furthermore,
the theory no longer holds when developing countries are included in the analysis. Extending the labor
market theory to developing countries implies that lower-skilled individuals in these places should be
more accepting of globalization because competitive advantage dictates that they are the primary
beneficiaries. However, the correlation between education and attitudes about globalization holds even
in developing countries in which lower-skilled individuals are the ones who stand to benefit the most
from openness to trade (Beaulieu, Yatawara, & Wang, 2005). The analysis that follows will show that
the same relationship holds true for foreign investment. Low-skilled workers in developing countries,
who stand to gain the most from FDI according to factor models, are less supportive of it than highskilled workers.
This finding is puzzling because it is the opposite of what one would predict based on the
standard Heckscher-Ohlin model. Although the Heckscher-Ohlin model was developed as a
macroeconomic model to predict aggregate trade flows, it has clear political implications for which
groups will benefit most from international trade. Stolper and Samuelson (1941) extends the theory to
6
politics by arguing that those who benefit most from trade will support it and those who are harmed by
trade will oppose it. This insight forms the basis of political economy studies of both trade policy and
FDI such as the recent work by Pandya and Pinto. The growth in surveys that address political issues like
2
trade, immigration, and foreign investment since the 1990s has made it possible to test the Stolper-
Samuelson predictions at the individual level, contributing to a growing body of research on public
opinion and globalization.
This research paper finds evidence that contradicts the political economy model of FDI
preferences. It advances the debate about the "education puzzle" in globalization research by showing
that the factor model is not sufficient to explain policy preferences on foreign investment. Adopting
some of the insights of earlier work on trade and immigration, this analysis shows that education is
linked to attitudes about foreign investment, not through labor market outcomes, but because
education is associated with economic knowledge and cosmopolitan belief systems. By using multiple
surveys and a broad selection of countries, this data increases the generalizability of the findings and
expands the scope of previous analyses to new countries.
The empirical analysis uses multiple cross-national surveys to test hypotheses about the
determinants of preferences on foreign investment. The Latinobarometer surveys from 1995, 1998, and
2001 all include questions about FDI and national economic perceptions, so they are an ideal source for
studying how evaluations of the economy relate to foreign investment policy preferences. These
surveys include data from 17 Latin American countries. The analysis of pro/anti-American sentiment
comes from the 2006 Gallup Voice of the People Survey, which was conducted across 57 countries. As
an additional contribution to the field, this research represents the first analysis of the Voice of the
People data to examine public opinion on foreign investment. It is the most comprehensive study to
research on attitudes about international trade and globalization began in the 1970s primarily in
developed countries. For more on the history of survey research, see Groves (2011).
2Survey
7
date on public opinion about foreign investment in developing countries. The data demonstrate a
strong empirical relationship between anti-Americanism and opposition to globalization in many,
although not all, countries. This relationship diminishes the role of education and skills in explaining
attitudes about globalization, even though those with more education remain supportive of
globalization on average even when accounting for anti-American attitudes. The analysis also indicates
the weaknesses in the standard factor model and the importance of cultural influences in better
explaining the variation in preferences.
This research provides an original contribution to the study of public opinion on globalization by
examining new data and new hypotheses about foreign investment policy. Beyond the original
academic contributions of this work, this paper also provides practical implications for foreign investors
and policymakers. When foreign investment deals go awry, there can be large costs for the firms
involved. Both investors and politicians want to know why investments are likely to face public
resistance to avoid political risks and respond to public opinion. If existing theories of public opinion and
FDI policy are incomplete or incorrect, then the solutions they imply for generating support for FDI will
be ineffective. While this analysis is not intended to predict support or opposition to any particular
investment or policy change, it shows that national economic conditions and beliefs about the sending
country can influence support for foreign investment in general. These relationships are surprising in
light of existing models, but may seem intuitive for those familiar with foreign investment and political
risk. Savvy investors and politicians may take these factors into account already, but this work
demonstrates the power of these explanations relative to the existing political economy model. This
research improves on existing theories of foreign investment preferences and provides an important
corrective to the standard factor model while exploring opposition to globalization in a broader sample
of developing countries.
8
II.
Foreign Direct Investment in Developing Countries
Foreign investors are increasingly directing funds to developing economies, yet these
investments remain politically controversial. Political debates concern both the economic impact of
investment, who benefits and who is harmed by open investment policies, and cultural and nationalistic
ideas about who should own industries and resources within the economy. Existing theories of FDI
preferences are insufficient to explain the wide variation in opinions about FDI around the world. After
defining FDI and describing how it has changed over time, I outline the debate about its economic
effects and the policies that governments in developing countries have adopted to encourage or
discourage foreign investment. This overview of foreign investment provides the motivation and
context for studying public opinion and foreign investment.
The technical definition of FDI is foreign investment with an ownership stake of at least 10
percent 3 , but this definition masks large differences in the types of foreign investment. Multinational
companies (MNCs) have multiple and diverse motives for investing, including access to new markets,
cheap labor, and natural resources. Fundamentally, the strategic decision about whether a firm should
invest directly, export, or enter a licensing agreement depends on the firm-specific advantages of
internalizing the production process (Dunning, 1974). Only when a firm benefits from controlling the
production of goods and services within the firm's own boundaries is FDI the optimal strategic choice for
international expansion. While each firm makes investment decisions based on its own calculation of
the costs and benefits of investing abroad, the location of FDI also depends on characteristics of the host
country. Although any given investment may favor skilled or unskilled labor, both economic theory and
empirical evidence confirm that at an aggregate level, FDI reflects the comparative advantage of the
host country (Qiu, 2003). In countries where labor is abundant, FDI more often flows to labor-intensive
is the definition currently used by the IMF, which is standard in analyses of FDI. The 10 percent cutoff is
arbitrary, but allows for comparability across data sources.
3This
9
industries like manufacturing, whereas in developed economies FDI is more likely to target capitalintensive service sectors. Much like international trade flows, FDI flows follow the patterns of
comparative advantage at the macroeconomic level despite heterogeneity among firms.
FDI refers to the ownership of assets in a host country, but there are many different forms FDI
can take, and these may have different implications for public support of FDI. FDI can be categorized as
greenfield investment, which involves creating a new business, a merger or acquisition of an existing
company, a joint venture with a domestic firm, or reinvesting additional capital into an existing foreignowned firm. A new greenfield investment is often the most desirable form of FDI because it directly
creates new jobs. Governments are increasingly competing to attract multinational companies (MNCs)
to invest in greenfield operations using tax incentives and subsidies (Blomstr6m, Kokko, & Mucchielli,
2003; Easson, 2001; Parys & James, 2010). Other forms of FDI may have a different impact on the local
economy. In some cases, a foreign acquisition of a domestic firm will result in job losses as the foreign
owner consolidates operations. FDI is a multi-faceted concept, and even economists debate whether it
has a net positive or negative impact on the host country. It is important to keep in mind that the public
perception of FDI does not necessarily align with the economic reality, and studying opinions about FDI
is useful to uncover both economic and non-economic reasons for FDI preferences.
FDI typically entails a longer term investment than portfolio flows, making it a more stable form
of international capital. This stability of FDI flows is one of the reasons that governments in developing
countries are increasingly seeking out FDI and reducing the barriers to investment. As shown in Figure
1, firms invested over $1.5 trillion abroad in 2011, a 25 percent increase over the last decade.4 The
following year, for the first time in history, investment flows to developing countries were larger than
those to developed economies, a trend which marks an important shift in the global economy.
4 (UNCTAD, 2012)
10
Understanding attitudes about FDI in developing countries is more important than ever before given the
growth in foreign investment flows.
FDI Inflows to Developing Economies
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Figure 1: FDI Inflows to Developing Economies
In recent years, governments have sought to attract FDI as a tool for economic development
because of its potential for new jobs, technology transfer, and skill development. However, the benefits
of FDI remain controversial. Foreign firms are often subject to criticism for not investing in local workers
or using local suppliers (Georgiou & Weinhold, 1992). Increasing competition to attract foreign
investment means more governments are offering tax benefits to investors. Although tax incentives are
an effective device for politicians to claim credit for economic development (Jensen et al., 2010), the
benefits realized from FDI often fail to compensate for the tax and subsidy packages that investors
receive (Blomstrom et al. 2003).
Politicians frequently use anti-foreign investment messages to mobilize groups that oppose
globalization. These efforts have led to the nationalization of foreign investments and the expropriation
of foreign-owned assets in some countries. In Latin America, populists in Venezuela and Argentina have
recently nationalized industries or broken contracts with foreign investors in favor of domestic
ownership of industry. The Bolivian president Evo Morales is an outspoken critic of the role of multinational corporations (MNCs) in Latin America and has nationalized 14 companies since taking office in
11
2006. In a 2012 speech, he stated, "Sovereignty over natural resources is a requirement for liberation
from colonial and neoliberal domination and for the full development of the people ... However, in
most countries this wealth has been looted and appropriated in private hands and by transnational
powers that enrich themselves at the expense of the people." This statement epitomizes the populist
opposition to FDI that continues to play an important role in the politics of many developing countries.
The government of India recently scaled back plans to open the retail sector to foreign competition after
a public outcry in support of small local shopkeepers. Clearly, domestic political concerns reveal mixed
feelings about the value of FDL. A better understanding of constituent perceptions and preferences can
help leaders balance the interest of voters, businesses, and foreign partners when determining policy.
12
lil.
Public Opinion and Economic Policy Issues
Political scientists have been studying public opinion since the first surveys using population
sampling were introduced in the 1940s. Research on public opinion has generated many insights about
political attitudes, preferences, and behavior, and it is important to consider how the developments in
survey research relate to the study of economic policy preferences. One of the results from early public
opinion research in the United States is that citizens are not well-informed about public policy
(Schattschneider, 1975). This result implies that survey responses should not be viewed as informed
beliefs based on a rational calculation of the economic consequences of a policy, as they often are in
strict rational choice models. Instead, public opinion represents positive or negative sentiment about an
issue that is not necessarily a deeply held belief, but instead may be informed by cues like elite opinion
(Berinsky, 2009), ideology (Dalton, 2008), and reasoning based on heuristics (Mondak, 1993). Moreover,
individual opinions need not be rational in order to generate policies that reflect aggregate opinions in
an economically rational way (Erikson, Wright, & McIver, 1993; Page & Shapiro, 2010). The weight of
evidence from survey analysis in the United States is that economic self-interest is insufficient to
understand individual policy preferences, but this remains the standard model in studies of the politics
of foreign investment,
The lack of policy knowledge in the general population is one factor to consider for any public
opinion research. Although the surveys I examine do not assess respondents' knowledge of economics
or economic policy, research on other policy issues indicates that citizens are often misinformed or
uninformed about economic policy issues (Carpini, 1996). If citizens do not know the definition of
foreign direct investment or how it works, then why study public preferences on FDI? What does it
mean to study public opinion about an issue that few people fully understand? I argue that complete
information and knowledge of a topic is not necessary to form an opinion about a policy issue. Even for
highly salient economic issues like unemployment, the public is often misinformed about technical
13
definitions and subject to the influence of anchoring values (Ansolabehere, Meredith, & Snowberg,
2013). Despite this lack of knowledge, few would argue that attitudes about unemployment are not
meaningful. In the same way, the public does not need to know exactly how much FDI is flowing into
the country or the definition of greenfield investment in order to have a positive or negative attitude
about foreign investment. Respondents understand the meaning of the words "foreign" and
"investment" and have impressions and associations that inform their attitudes about foreign
investment and their responses to survey questions on the topic. Politicians respond to voters who have
limited information, so even uninformed opinions are important because they have the potential to
influence policies.
Much like other economic policies, foreign investment can become a flashpoint when an
investment is controversial or a new international agreement is signed, but it has low salience most of
the time. It is not necessary that individuals have deeply held beliefs about foreign investment or pay
attention to it all the time. As with any other policy issue, attention spikes and then subsides. It is often
a minor issue during election time unless there is a specific triggering event that generates news
coverage. Yet, understanding the determinants of public opinion can be especially important when it
becomes a major political issue, and there is a gap between the latest research on public opinion and
the assumptions of political economy models of FDI preferences.
14
IV.
Literature Review: Public Opinion and FDI
Research on the politics of FDI is a growing field in international political economy, but there are
still only a few studies that focus specifically on FDI preferences and policy toward inward foreign
investment. However, the more mature research on trade and immigration offers many useful insights
that may apply to FDI. In particular, studies indicate that national economic conditions and cultural
attitudes matter for support of foreign economic policies. Despite this evidence, most research on FDI
focuses primarily on individual economic self-interest as the driver of both preferences on FDI and
national policies. This limited focus overlooks important insights from the broader field of foreign
economic policy preferences, specifically recent contributions from the fields of trade and immigration
that can be adapted to the study of FDI.
When individual actors are considered in research on the politics of FDI, the focus is most often
on the perspective of investors evaluating political risk in destination countries. Foreign investors face
the risk that governments will change regulations, breach contracts, expropriate assets or otherwise
reduce the value of investments. While this research offers interesting insights about how political
institutions influence risk, it does not address how host governments make policy to restrict or
encourage FDI. Political institutions play an important role in constraining leaders from taking actions
that might harm investors. Research in this area indicates that democracies are better at creating a
credible commitment to property rights, which in turn contributes to higher levels of investment
(Jensen, 2006; Jensen et al., 2012; Li & Resnick, 2003). While better knowledge about how international
firms consider political risk is valuable, it is only one side of the equation. Governments also make
decisions about whether to block or encourage foreign investment within their borders.
Recently, scholars have begun to examine the politics of foreign investment from the "demand
side," analyzing how citizens and governments in host countries attempt to either limit or attract foreign
investors. This new line of inquiry has made substantial progress toward an understanding of FDI policy
15
in host countries, but important gaps remain. Specifically, research has not considered how national
economic conditions influence public support for FDI, or how non-economic factors like nationalism
affect FDI preferences.
Research on the demand for FDI has begun to use the lens of political economy to examine
public preferences toward foreign investment. The prevailing argument in many studies is that those
who benefit most from FDI will tend to favor it while those likely to lose economically from greater
foreign investment will oppose it (Biglaiser et al. 2012; Pandya, 2010; Pinto & Pinto, 2008; Pinto, 2013).
These models depend on the Heckscher-Ohlin model of trade, which famously asserts that the most
abundant factors (capital or labor) in an economy will benefit most from increased trade. A country that
is more abundant in capital will export capital-intensive goods and import labor-intensive goods. This
will increase the demand for capital-intensive production in the domestic economy and reduce the
demand for labor-intensive production as firms respond to international comparative advantages based
on the abundance of factors in each location. The reverse holds true in countries where labor is
abundant relative to capital, which is typical of developing economies. The Stolper-Samuelson Theorem
extends this idea into the political sphere by suggesting that those who benefit most from trade should
support policies that encourage it while those that stand to lose out will oppose increased trade. In the
factor model of trade, abundant labor in developing countries means that workers will favor trade while
owners of capital oppose it. The reverse is expected in industrialized countries.
It is important to note that the factor model requires that factors of production are perfectly
mobile across industries. In practice, this means that capital can be directed to another project with no
transaction costs and workers can easily and immediately transfer their skills to another industry. While
this is a reasonable assumption in some circumstances, factor mobility can change over time and may
differ across countries (Hiscox, 1999). Instead, the specific factors model, known as the Ricardo-Viner
model, may better reflect individual incentives. The Ricardo-Viner model posits that the losers from
16
globalization will be those who work in import-competing industries, regardless of their skill level. If the
assumption of factor mobility is wrong, the cleavage on globalization may be industry rather than skill
level. However, empirical research in this area finds little relationship between industry and
globalization preferences (Hays, 2009; Mansfield & Mutz, 2009; Scheve & Slaughter, 2001).
Building on the factor model, scholars studying FDI argue that labor benefits from increased
inflows of FDI because it creates competition and drives up wages, but domestic producers lose out
from the increased competition in both labor and product markets (Pinto & Pinto, 2008; Pinto, 2013).
Studies confirm that foreign investors pay higher wages on average than domestic firms (Conyon et al.,
2002; Feenstra & Hanson, 1995). Therefore, the largest support for FDI should come from workers and
the political parties that depend on votes from labor. Pinto & Pinto (2008) find that right-leaning
governments are more likely to receive FDI in energy and construction industries, which benefit
domestic owners of capital, while left-leaning governments attract more investment in manufacturing
as it drives up competition for labor. The empirical support for the theory relies on data on inflows of
FDI by sector under different partisan governments. While this data captures the ultimate outcome of
investment flows that result from an interaction between investors and politics, it does not analyze the
individual preferences on either side. An analysis at the individual level is a necessary first step to test
the mechanism that foreign investment flows reflect economic self-interest, which leads politicians to
support the FDI policies that their constituents favor. The theory implies that workers will be more
supportive of FDI than business owners, and that their political representatives will favor policies that
attract FDI to labor-intensive sectors. However, it does not directly test this hypothesis at the individual
level.
In one of the few studies that analyzes survey data on FDI preferences, Pandya (2010) shows
that high-skilled workers in Latin America are more supportive of FDI than low-skilled workers, even
when taking into consideration job insecurity, attitudes toward privatization, and level of education.
17
This result is contrary to the standard prediction from a factor model of FDI in which the most abundant
factor in society benefits from FDI. In developing countries, low-skilled labor is the most abundant
factor, so this group should be most supportive of FDI. Yet, this group tends to oppose FDI despite the
predicted benefits. Pandya suggests that economic self-interest is still driving opinions about FDI, but
the factor model is incorrect about who benefits from FDI. Foreign firms tend to hire workers with
above average skill levels, so high-skilled workers may benefit more from FDI, which influences their
opinions. Another study of FDI preferences confirms the same pattern among workers in China, but
specifically tests whether the type of FDI influences opinions. High-skilled workers in China are more
supportive of FDI than less skilled workers even when the investment targets low-skilled workers (Zhu,
2011). These results parallel research on trade policy that shows more educated workers tend to favor
openness to international trade even in developing countries where skilled workers are scarce (Chiang,
Liu, & Wen, 2013; Mayda & Rodrik, 2005). Together these surveys present a puzzle for the factor model
because high-skilled workers are more supportive of trade and foreign investment in the developing
countries that are studied even when their personal income is unlikely to be affected.
Research on public opinion about foreign investment has focused primarily on how personal
economic outcomes affect preferences, but there is a significant body of research on other economic
policies, including trade and immigration, that questions this approach. Early research on trade policy
preferences indicated a relationship between factor endowments and support for openness to
international trade with high-skilled workers in developed countries supporting international trade while
low-skilled workers were more likely to oppose it just as the factor model suggests (Balistreri, 1997;
Kaltenthaler et al., 2004; Mayda, 2008; Scheve & Slaughter, 2001). However, one critique of these
empirical studies based on the factor model of trade preferences is that skill levels are often measured
by years of education, which measures not only skill but also socialization into a more cosmopolitan
value system and better knowledge of economics (Hainmueller & Hiscox, 2006). Conflating these
18
factors meant even though education had a significant effect on trade policy preferences, the model
could not differentiate between theories that emphasize personal economic considerations, values, and
knowledge. By comparing those in the labor force to retirees with similar levels of education,
Hainmueller and Hiscox (2006) found that education continued to influence trade policy preferences
even when trade no longer had an impact on personal income. This finding indicates that individual
economic considerations were overstated in earlier research and that education contributes to support
for trade through other means, including socialization into cosmopolitan values and training in
economics. This important insight has not been incorporated into the study of FDI preferences, which
continue to interpret education as primarily an indicator of an individual's economic opportunities.
The literature on economic voting5 suggests the current focus on how personal economic
conditions influence FDI preferences is misplaced because people often look to the national economy to
evaluate economic policies. This criticism has recently been incorporated into research on trade policy
preferences. The Heckscher-Ohlin model of trade policy preferences places high cognitive requirements
on individuals who must think about the impact of trade policy on their personal economic situation
(Mansfield & Mutz, 2009). This requires a complex calculation of how national policy relates to a local
phenomenon. In the literature on economic voting, there has been a long-running debate about
whether citizens vote based on changes in their own personal economic circumstances, known as the
"pocketbook hypothesis" (Campbell, 1980), or whether they look to the state of the economy more
broadly and vote "sociotropically" (Kinder & Kiewiet, 1981). Recent research on economic voting shows
6
that self-interest rarely drives voting at the national level. Instead, the dominant view today is that
people evaluate political candidates based on the overall health of the economy (Anderson, 2007). This
"sociotropic" theory of voting has influenced research on trade policy preferences. Mansfield and Mutz
s Economic voting is the study of how economic conditions affect vote choice.
6There continues to be some debate about the conditions under which "pocketbook" voting might occur. For an
overview of the research, see Lewis-Beck & Paldam (2000).
19
(2009) find that perceptions of the overall impact of trade on the U.S. economy are the primary
explanation for attitudes toward trade rather than personal economic self-interest. The theory of
"sociotropic" evaluation of economic policy could be applied to foreign investment policy preferences as
well. The varied nature of FDI, which includes greenfield investment, acquisitions, and joint ventures,
means it has even more complex economic implications that make it difficult to determine individual
effects. Yet, no research on FDI has addressed this alternative explanation.
While much of the research on foreign economic policy preferences focuses on economic
explanations, a number of studies address cultural attitudes and values. Globalization has important
economic implications, but international flows of goods, capital and people also have cultural meaning.
The way that people interpret globalization and policies to expand or restrict these flows depends on
cultural beliefs and values. Citizens who are more concerned about preserving national identity should
be the most resistant to foreign influences while those with a more cosmopolitan outlook should be
more supportive of foreign interaction, whether it takes the form of trade, FDI, or immigration. There is
evidence that more cosmopolitan attitudes are associated with greater support for trade (Hainmueller &
Hiscox, 2006; Mansfield & Mutz, 2009) and economic integration (Hooghe & Marks, 2004). Similarly,
studies of attitudes toward immigration indicate that nationalism is a strong predictor of opposition to
immigration, especially among those no longer in the labor force (O'Rourke & Sinnott, 2006). While
these studies mostly rely on observational data, Margalit ( 2012) includes a survey experiment to
demonstrate that perceptions of cultural threat are a causal factor in attitudes about globalization
rather than simply correlated with anti-globalization sentiment. Yet, the only study to examine
nationalism and FDI preferences finds no link between the two (Pandya, 2010). The lack of a
relationship between nationalism and opinions about foreign investment is puzzling considering FDI
raises many of the same concerns as trade policy when it comes to economic reliance on other
countries. The null result may be because of the difficulty in measuring nationalism. There may be
20
some forms of nationalistic beliefs, such as anti-Americanism, that influence opinions about FDI while
national pride or feelings of cultural superiority do not have an effect.
Beyond broad cultural values, preferences toward globalization also reflect specific biases,
prejudices, and opinions about foreign countries and their inhabitants. Several studies show that the
country of origin influences support for FDI (Jensen and Lindstadt, 2012; Jensen and Malesky 2010). In
the US and UK, respondents expressed greater support for investment from Germany compared to
investment from Saudi Arabia. As Jensen and Malesky (2010) suggest, perceptions of national
competitiveness can influence support for foreign investment, which is a possible explanation for
negative reactions to Chinese investment by US respondents in the study. Research on immigration has
also examined country-of-origin effects as they relate to beliefs about immigrants. Immigrants from
different sending countries provoke different reactions and stereotypes (Hainmueller & Hiscox, 2007).
Respondents who believe in negative ethnic stereotypes are more likely to oppose immigration (Burns &
Gimpel, 2000; Citrin et al., 1997). These studies indicate that negative associations with particular
groups are important to understand resistance to certain types of globalization, but the existing
research on how cultural attitudes affect support for FDl does not adequately address the relative
importance of these factors compared to economic explanations.
Research on public opinion about foreign economic policies recognizes there are limitations to
existing surveys. Respondents often have low levels of knowledge about economic policies, and
answers to survey questions depend on how the question is phrased. Recent work in this area examines
how question framing influences public opinion. Hiscox (2006) finds that support for international trade
in the US declines significantly when the question includes negative information about potential job
losses, but it does not increase when there is a positive framing that mentions job gains. When the
survey experiment was repeated in Argentina, the results were similar with the negative framing of the
question producing a stronger effect, especially among those most at risk for job loss (Murillo, Pinto, &
21
Ardanaz, 2012). The order of questions also matters. When questioned about support for both
increased investment opportunities for US investors abroad and greater openness to foreign investment
at home, US respondents were more supportive of FDI when asked first about opportunities for US
investors (Jensen & Lindstadt, 2012). The authors interpret this as a desire for greater reciprocity
because inward FDI is more acceptable when people first consider outward FDI. These studies in
question wording and order make clear that small differences can affect the way that people interpret
questions and which cues they follow. While this indicates that some people do not have strongly held
views on the topic, it does not mean that there is nothing to be gained from survey research. Instead, it
points to the need to study differences across groups on the same question rather than focusing on the
absolute level of support or opposition to FDI.
The literature on preferences toward FDI has focused primarily on the distributional
consequences of foreign investment for individuals and perceptions of the source country, but there are
a number of important explanations of FDI preferences that have been overlooked. There is currently
no satisfactory account of public opinion on foreign investment in developing countries. My research
will explore how the recent developments in theories of trade and immigration preferences apply to
FDI.
22
V.
Theory and Hypotheses
The standard Heckscher-Ohlin factor model that forms the foundation of research on FDI
preferences is simple and intuitive because it relies on rational choices made by individuals pursuing
their economic self-interest. Following the definition in Sears and Funk (1991), self-interest refers to the
short to medium-term impact on the material well-being of the individual's own personal life (or that of
his or her immediate family). If self-interest is not the basis for opinions about FDI, then what are the
alternatives? One alternative is known as "symbolic politics," which refers to learned responses to
political symbols. If attitudes are the result of cultural associations, then economic considerations may
not come into play at all. Another alternative to a theory based on self-interest is that attitudes are the
result of "sociotropic" politics, in which individuals consider the overall impact of a policy on their region
or nation rather than on themselves (Kinder & Kiewiet, 1981). Unlike a theory based on self-interest,
sociotropic theories do not require individuals to calculate the direct impact of a policy on their own
situation. Instead, they simply believe the policy is good for the larger population, which may have
indirect benefits for them personally. This work explores whether self-interest, symbolic politics, or
sociotropic reasoning is best able to account for the empirical pattern of greater support for FDI among
the most skilled and highly educated workers in developing countries. In order to address this question,
I examine the assumptions inherent in the standard economic self-interest theory and offer several
hypotheses that fit with the alternative models.
The factor model relies on economic reasoning about the consequences of FDI, which means
that individuals must understand the economic impact of FDI on their personal economic situation in
order to form an opinion on the issue. There is substantial research on public opinion that questions
whether this is a reasonable assumption. Limited information and uncertainty about policies are
common especially for international economic issues that are removed from the daily experience of
citizens. The immediate and visible impacts of a policy can also sway opinions even if the long-term
23
effects may be different. Ultimately, economic interests are not the only consideration for FDI policies,
which also reflect political ideologies and attitudes about the cultural changes that accompany
international engagement. I propose and test three hypotheses that acknowledge the potential
limitations of reasoning on complex foreign economic policies. The hypotheses are that FDI policy
preferences are informed by national economic conditions, political ideology, and attitudes about major
economic powers. These hypotheses, which are described in more detail below, are designed to
improve existing models of public opinion on FDI. They may be either a complement or a substitute to
the existing factor model, so each hypothesis is evaluated with respect to the baseline model.
One of the most fundamental assumptions of the Heckscher-Ohlin factor model is that the
beneficiaries of globalization are clear a priori and that they can be derived based on the relative levels
of capital and labor in an economy. Instead, I argue that foreign investment has complex consequences
that are not clear at the outset, so it is difficult, if not impossible, for individuals to understand how
investment will affect them personally. While the aggregate impact of foreign investment to developing
countries may be higher wages for low-skilled workers, this outcome is not guaranteed or clear at the
outset. It is hard enough to anticipate the consequences of a particular foreign investment because of
uncertainty about future market outcomes, but foreign investment as a broad category is even more
difficult to evaluate. Even in labor-abundant economies, there are often large foreign investments in
industries that are capital intensive, such as oil and gas extraction, mining, and telecommunications. For
investments in these sectors, the factor model is not expected to hold (Pinto & Pinto, 2008). Given the
uncertainty that surrounds foreign investment and its potential impact, perfectly rational economic
models may not be appropriate because individuals do not form strong views of the expected impact of
FDI on their well-being.
Even if all of the uncertainty surrounding the benefits of foreign investment was removed, the
typical citizen has limited information about foreign investment policy and its relationship to their
24
economic prospects and few reasons to dig deeply into the issue. There is a long tradition in studies of
American public opinion that points to the lack of political knowledge and ideological coherence of
voters (Kinder, 1983). However, more recent research suggests that voters may be able to overcome
the problem of limited information using heuristics, or mental short-cuts, like party labels and expert
opinions (Sniderman, 2000). Studies show that voters frequently use heuristics to make decisions about
candidates when they have little information (Lau & Redlawsk, 2001) and that these may lead to choices
that are rational in the aggregate (Page & Shapiro, 2010). Despite the recognition of voter ignorance
and the use of heuristics by scholars of American public opinion, research on foreign economic policy
preferences ignores these limitations and continues to assume that individuals are well-informed about
complex policy issues.
Standard political economy models assume that all economic benefits are either realized
immediately or discounted appropriately to their present value, but the reality of foreign investment is
that it can take a long time for benefits to materialize and individuals are risk-averse, preferring benefits
now to greater benefits in the future (Holt & Laury, 2002). At the early stages, the costs of new foreign
investment can be more apparent than the long-term benefits. There is a tendency to focus on small
groups that will bear concentrated costs from adjusting to foreign investment rather than on diffuse
benefits because these groups are more organized (Olson, 1965) and often more sympathetic for news
stories. For example, increased competition from foreign retailers has a serious economic impact on
local shop owners, and the closing of local stores makes for a vivid and personal news story that
generates more attention than the long-term benefits of lower prices. Public opinion on FDI is likely to
be shaped by the focus on the immediate negative effects of foreign investment and media coverage
surrounding foreign investment issues.
The standard model emphasizes the economic outcomes of globalization without considering
the importance of cultural changes and identity politics that can influence attitudes. Foreign investment
25
means more than just foreign corporations providing capital for the economy, it means foreign goods
entering the marketplace and foreign ownership of land, resources, and profits. These investments
accompany significant changes to a local economy that can be threatening to those who prefer the
status quo. International exchange brings not only new products and services but new ideas, new
technologies, and new ways of conducting business. For those who hold strong nationalistic values or
negative prejudices about other countries, FDI represents unwanted engagement with other nations.
When it comes to the cultural aspects of globalization, the United States has an outsized presence
because of its influence in the media and entertainment industries, which broadcast American culture
around the world (Margalit, 2012). Yet, these cultural and ideological aspects of foreign investment
preferences are often overlooked.
There are many potential hypotheses that would address the uncertainty about the economic
benefits of FDI, limited information, risk aversion, visibility of groups that are negatively affected, and
feelings of cultural threat. This paper focuses on three areas in particular: evaluations of the national
economy, political ideology, and anti-American sentiment. Each of these addresses some of the
questionable behavioral assumptions in the factor model and allows for a more complete understanding
of preferences on FDI.
While economic explanations of FDI preferences have focused primarily on the distributional
consequences for individuals, there is a tradition of research both in political economy and electoral
studies that shifts the focus to national economic conditions. Based on the insights from this work, I
expect that support for FDI will be greater when the economy is doing well and opposition to FDI will
increase when the economy is perceived to be in decline. For example, studies of violence against
foreign immigrants show that it increases during periods of economic recession because some groups
blame foreigners for the state of the national economy (Alber, 1994). Politicians can also benefit from
blaming foreign corporations for poor economic performance. As Jodice (1980, p. 191) notes, "from the
26
point of view of power maintenance, economic frustrations will be directed against a foreign scapegoatthe multinational enterprise-rather than against the governing regime." Given the incentives of
politicians to use MNCs as scapegoats during periods of economic recession, voters may have more
negative opinions of foreign investment when the economy is in decline. Attitudes about FDI might also
reflect a broader evaluation of economic policy rather than a simple self-interest motivation. Media
coverage about foreign investment is often linked to concern about the decline of the economic
competitiveness rather than highlighting the consequences for particular groups. For these reasons, I
expect support for FDI to be higher among those who believe the economy is doing well and lower
among those who are pessimistic about the economy.
As an economic superpower, the United States is host to many of the largest multi-national
companies that invest abroad and is a major player in international negotiations surrounding foreign
investment and trade policies. Given the substantial role of the United States in foreign economic
policy, it is natural to ask whether anti-American attitudes influence preferences regarding globalization
and foreign investment. There are several mechanisms that could create a link between antiAmericanism and opposition to foreign investment. Positive attitudes about the United States may
indicate a more cosmopolitan and less nationalistic outlook. Those who embrace the United States are
less likely to view investment by a foreign country as coming at the expense of domestic investors or the
national interest. Another possibility is that pro-U.S. attitudes reflect a general agreement with the
principles of US foreign economic policy, which promotes globalization and foreign investment. In this
case, opinions about the United States would fit within a broader ideology of economic liberalism.
Rather than broad ideological agreement, favorable views of the United States may be more specific to
positive feelings about investment by the United States in the country and the benefits of trade and
investment from American companies. Of course, another option is that there is no link between
attitudes about the United States and foreign investment because the two topics are viewed as
27
unrelated. This would be the case if individuals purely consider the economic benefits of policies rather
than their cultural meaning and ideological connotations.
While this theory may appear to give too much weight to the United States in an era when
regionalism is on the rise, it raises important questions about the association between globalization and
American economic dominance that can be tested empirically. If individuals do not link their opinions
about the United States to foreign economic policies, then this will be clear in the data. However,
demonstrating that there is a relationship between anti-American attitudes and opposition to foreign
investment does not differentiate between the various mechanisms that might lead to this result. These
include negative perceptions of American companies that have already invested in the economy,
concerns about the loss of cultural identity through the importation of American products, and
identifying globalization as an American-led ideology. Yet simply testing whether the relationship exists
is a step forward and establishes a foundation for further inquiry into the causes. Since the research on
public opinion and foreign investment has not addressed this question with a broad empirical study, this
work breaks new ground.
The topics of evaluations of national economic policy and attitudes about economic partners
have been explored in the literature on trade and immigration. This work will expand these theories to
consider how they apply to foreign direct investment. FDI is an understudied area of foreign economic
policy, and developing and testing a more comprehensive set of hypotheses is an important contribution
to research in this field.
28
VI.
Research Methodology
In order to test the hypotheses outlined above, I analyze variation in preferences on FDI using
public opinion surveys because these are the best way to directly measure how respondents in
developing countries think about FDI. There are relatively few surveys that ask questions about foreign
investment compared to other economic policies like international trade and foreign aid. The four
surveys in this analysis, three Latinobarometer Surveys and the Gallup 2006 Voice of the People Survey,
were selected because they provide the broadest coverage of developing countries and include the
necessary questions to test the hypotheses. These are the only cross-national surveys that ask
specifically about foreign investment rather than international trade or globalization, and the FDI
questions are only included in specific years. All years with FDI questions are included in this analysis.
The Gallup survey was conducted in 57 countries, including both developed and developing countries,
many of which have never been analyzed in studies of attitudes about globalization.' The
Latinobarometer surveys include 17 countries from Latin America. By studying many countries in
different years from 1995 to 2006, the survey analysis helps to assess the generalizability of the findings.
All surveys were administered across multiple countries using a random sampling procedure within each
country, so they allow for inferences about the entire population of each country. The survey analysis
tests the conventional wisdom that preferences on globalization are driven by economic self-interest in
relation to alternative explanations that national economic conditions, political ideology and antiAmericanism influence opinions about FDI.
The public opinion analysis examines variation on FDI preferences within each country, which is
useful for comparing how domestic groups with different characteristics feel about FDI. Since the
question wording is significantly different across surveys and none of these are panel surveys, the
I There are five additional countries with only partial survey responses to the Voice of the People survey, and they
are not included in the analysis.
29
analysis is not intended to compare responses over time. Instead, the focus of the analysis is on
variation in responses within each country during a given year when the survey was conducted. Groups
within a country are compared to each other. By using multiple surveys in a variety of countries and
time periods, the results are more generalizable than a single country study. In comparison to previous
research, the study is much more comprehensive and sheds light on FDI preferences in developing
countries such as Malaysia, Nigeria, and the Congo that are not typically included in studies of
globalization preferences.
This paper seeks to explain attitudes about FDI, so the dependent variable is the respondent's
attitude about foreign investment. In some models, the dependent variable is the attitude about
globalization, which includes FDI along with trade and other global flows. Attitudes are measured by a
dichotomous variable with a value of 1 indicating support and 0 indicating opposition to FDI or
globalization because the surveys only offer two choices. While the wording of questions differs across
surveys, the procedure for creating the dependent variable is the same. The data are limited by the fact
that respondents do not express the strength of their opinion. Those who strongly oppose foreign
investment are in the same category as those who slightly oppose it. While this is a simplification of real
preferences, it is typical for surveys to categorize opinions in this way, and respondents have the option
of stating they don't know or don't have an answer.
The regressions used in the survey analysis are probit models, which are a useful model for a
dependent variable that is between 0 and 1. In order to focus on variation within countries, dummy
variables for each country control for country-specific differences in levels of support for FDI. This
means that the variation analyzed in the model represents the difference within countries rather than
differences between countries. There is large variation between countries in levels of support for
globalization, which is highlighted in the descriptive statistics, but is not the focus of this study. The
analysis will compare the hypotheses about the determinants of opinions about globalization to
30
standard models that focus on economic factors. The independent variables used to test each
hypothesis depend on the survey and are described along with the control variables in each section
below.
Although survey analysis is one of the best methods for understanding individual opinions in a
large population, there are some limitations to this research methodology and to these surveys. By
design, surveys present a snapshot in time, so surveys from the late 1990s and early 2000s speak to
opinions at that time and are not designed to reflect current attitudes. However, at an aggregate level,
opinions on FDI are relatively stable. The responses to the FDI question in 1995 and 1998 for each
country have a correlation coefficient of .65, which means sentiment about FDI in 1995 is a strong
predictor of sentiment in 1998 in the same country. Since these surveys are not a true panel (a new
sample of respondents is selected each year), the data does not reveal whether individual opinions are
stable over time. Because the factor model is designed to be a universal theory of attitudes about FDI, it
should apply in any time period including the one studied here. It is useful to keep in mind that there
may be historical factors that influence opinions about FDI in a given period, but it is still possible to
analyze which model best explains attitudes about FDI and whether it fits in each of the years studied.
Since the data is cross-sectional and the independent variables are not randomly assigned, the
analysis is subject to the problem of endogeneity, also known as reverse causation. For example,
attitudes about FDI could influence citizens' views about the national economy, change their partisan
ideology, or generate anti-American sentiment. There may also be omitted variables that are related to
opinions about FDI and economic evaluations, ideology, or anti-Americanism, and these could be the
true determinant of FDI opinions. Each model includes standard demographic variables to control for
known factors that are associated with FDI preferences, but there could still be unobserved confounders
that were not measured in the survey. There is no way to control for endogeneity completely in the
current data, but a natural extension of this work would be to conduct a survey experiment. In a survey
31
experiment, one could randomly assign a treated group to a priming condition that evokes national
economic outcomes, partisanship, or nationalism before asking about FDI. Then responses could be
compared to a control group that is not primed to see the impact of each of these factors without facing
an endogeneity problem.
Despite the limitations of survey analysis using probit regression models, these remain a
standard tool for testing hypotheses about public opinion on policy issues. Because the Voice of the
People survey data has never been analyzed with regard to FDI, an initial cross-sectional analysis is
useful for understanding how well the current hypotheses explain FDI preferences. This initial
investigation provides the impetus for further study by uncovering the relationships in the data.
Understanding individual preferences is a starting point for explaining political behavior related to
globalization, such as protest movements and lobbying. It will inform future studies of FDI policy and
FDI flows that depend on an accurate understanding of public sentiment.
32
VII.
National Economic Evaluations and Support for FDI in Latin America
Latin America presents an interesting test case for understanding public opinion about foreign
investment because foreign investment has grown dramatically over the last 30 years in the region, but
globalization has been a contentious issue. During the 1990s, Latin American countries saw large
increases in FDI following major economic stabilization reforms that included privatizing many stateowned enterprises. These reforms were controversial at the time both because they involved the
privatization of state-owned assets, which raises ideological questions about the role of the government
in the economy, and because the privatization process meant significant job losses at a time of
economic austerity.
Following the peak of FDI inflows in the 1990s, Latin American countries have followed two very
different paths. Figure 2 highlights the period of the survey analysis, 1995-2001, in which FDI levels
were high throughout Latin America with Chile reaching a peak of FDI inflows valued at 12 percent of
the country's gross domestic product (GDP). In the decade that followed, Latin American countries
diverged considerably. Chile now epitomizes a high-growth export-oriented development path and
Venezuela shows how a socialist revolution can reverse FDI inflows. On one hand, populist leaders like
Hugo Chavez, the late President of Venezuela, and Evo Morales, President of Bolivia, have alienated
foreign investors by nationalizing foreign assets and advocating for greater state ownership of domestic
resources. On the other hand, governments like those in Chile and Colombia have reoriented their
economic policy to take advantage of growing foreign investment and economic integration. The public
in Latin America is both skeptical of multi-national companies and eager to achieve economic growth
after experiencing many decades of economic boom and bust cycles.
Latin America differs from other regions because large amounts of the foreign investment
flowing into the region target primary materials and extractive industries, in which foreign ownership is
especially controversial. There is also a temptation to nationalize these industries when commodity
33
prices are high (Duncan, 2006), actions which are often accompanied by anti-globalization rhetoric.
Across the region, the type of FDI can vary considerably from mostly low-skilled maquiladoras producing
textiles in Central America to mining in Chile and manufacturing in Argentina. These differences will
certainly affect citizens' perceptions of foreign investment, and ultimately their support for it. However,
by looking at factors that influence opinions about FDI within countries, any aspects of FDI that are
unique to a country are the same across the survey respondents.
FDI Inflows as % of GDP
14.0
U2C
6.
0
(.05.
20.0%
-C -
C
-
-
--
-\C
u
Figure 2: FDI Inflows as % of GDP
One advantage of studying FDI preferences in Latin America is that data is readily available. The
Latinobarometer is an annual public opinion survey that has been conducted by the non-profit
Latinobarometer Corporation (Corporacidn Latinobar6metro) in 17 Latin American countries since 1995.
It investigates a variety of topics related to politics, the economy, and values. It is one of the few
surveys that includes questions about foreign direct investment, but these were only asked in 1995,
in
1998, and 2001, which is why this analysis focuses on those years. These surveys have been used
previous analyses of public opinion on foreign investment (Beaulieu et al., 2005; Pandya, 2010), but
previous studies did not consider the effect of national economic evaluations. The surveys are especially
34
useful for the purposes of this study because they ask about past, current, and future economic
conditions in addition to the standard covariates used in public opinion surveys on globalization. The
1995 survey includes 8 countries, and the 1998 and 2001 surveys include 17 countries, which are listed
in Table lError! Reference source not found.. Descriptive statistics for the variables used in the analysis
are given in Table 2.
Table 1: Latinobarometer Country Coverage
1995
x
1998
x
x
2001
x
x
x
x
x
x
x
x
x
x
Ecuador
El Salvador
x
x
x
x
x
x
Guatemala
Honduras
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Country
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay
Venezuela
x
x
x
x
x
35
Table 2: Descriptive Statistics of Latinobarometer Data
1995
Mean Std. Dev.
1998
Mean
Std. Dev.
2001
Mean
Std. Dev.
FDI
FDI BENEFICIAL
0.80
0.40
FDI ENCOURAGED
0.78
0.42
0.78
0.41
0.75
0.43
Education
YEARS OF EDUCATION
EDUCATION LEVEL
9.46
1.36
4.56
0.91
10.28
1.46
4.31
0.92
8.78
1.21
4.63
0.90
UNIVERSITY
SOME UNIVERSITY
0.11
0.09
0.31
0.29
0.13
0.15
0.33
0.35
0.07
0.10
0.26
0.29
VOCATIONAL TRAINING
0.22
0.42
0.21
0.41
0.22
0.42
0.21
0.40
0.21
0.41
0.19
0.40
JOB INSECURITY
0.84
1.20
2.21
0.99
2.17
1.02
WORKING
PUBLIC SECTOR
PRIVATE SECTOR
UNEMPLOYED
RETIRED
0.53
0.10
0.16
0.00
0.09
0.50
0.30
0.37
0.00
0.28
0.58
0.10
0.19
0.05
0.07
0.49
0.29
0.40
0.21
0.25
0.56
0.09
0.17
0.07
0.07
0.50
0.28
0.38
0.26
0.25
HOMEMAKER
0.24
0.43
0.19
0.39
0.21
0.41
STUDENT
PROFESSIONAL
BUSINESS OWNER
FARMER
0.08
0.02
0.08
0.01
0.27
0.14
0.26
0.10
0.10
0.02
0.06
0.01
0.30
0.13
0.23
0.10
0.08
0.02
0.07
0.03
0.27
0.14
0.25
0.17
SELF-EMPLOYED SALES
0.14
0.34
0.07
0.26
0.18
0.39
0.06
0.06
0.07
0.23
0.24
0.25
0.06
0.05
0.03
0.23
0.23
0.17
0.05
0.22
0.53
0.60
0.50
0.49
0.51
0.57
0.50
0.50
0.51
0.00
0.50
0.01
39.05
0.68
15.72
0.47
38.23
15.12
38.67
15.96
2.48
0.14
0.73
0.35
0.17
0.38
0.14
0.35
0.50
0.50
0.49
0.50
0.52
0.50
2.50
0.76
0.99
2.92
0.88
1.19
0.17
0.90
0.77
0.79
0.79
0.73
0.75
2.40
0.65
0.88
2.94
0.87
1.12
0.91
0.68
0.77
0.83
0.68
0.75
2.21
0.36
0.47
2.85
0.40
0.59
0.91
0.58
0.61
0.82
0.61
0.67
SECONDARY
Occupation
MANAGER OR EXECUTIVE
WORKS IN OFFICE
WRITING & NUMBERS
Demographic
FEMALE
MARRIED
AGE
HOMEOWNER
Ideology
NATIONAL PRIDE
LEFT
RIGHT
Economics
NATIONAL ECONOMY
NATIONAL ECONOMY
NATIONAL ECONOMY
PERSONAL ECONOMY
PERSONAL ECONOMY
PERSONAL ECONOMY
DECLINE
CURRENT
CHANGE
FUTURE
CURRENT
CHANGE
FUTURE
36
0.38
There are two different questions that ask about opinions on FDI. These are used to construct the
dependent variables FDI BENEFICAL and FDI ENCOURAGED in the model. In the 1995 and 1998 survey,
the question reads "Do you consider that foreign investment, in general, is beneficial or is harmful to the
economic development of the country?" The variable FDI BENEFICIAL is coded 1 for beneficial and 0 for
harmful. In the 1998 and 2001 surveys there is a question that asks, "Do you strongly agree, agree,
disagree, or strongly disagree with the following phrase: Foreign investment should be encouraged."
Answers of agree or strongly agree are coded as 1, and disagree and strongly disagree are coded as 0 for
the variable FDI ENCOURAGED. 8 These variables capture basic attitudes about whether FDI is good and
policy preferences about whether it should be encouraged.
In general, evaluations and policy preferences regarding FDI in Latin America are positive more
often than negative with at least 75 percent favoring FDI in each year. Nevertheless, there is significant
variation both within and across countries. While the analysis in this paper considers only variation
within countries, it is useful to highlight cross-country differences to provide a sense of the total
variation. In 1995, 80 percent of respondents believed FDI is beneficial, and 78 percent expressed that
view in 1998. In total, 78 percent agreed that FDI should be encouraged in 1998 and 75 percent agreed
as of 2001. Some of the largest recipients of FDI, like Mexico and Brazil, are also the most negative
about its effects and whether it should be promoted.
In contrast, small Central American countries like
Nicaragua and Honduras show almost universal support for FDI. Although this study does not seek to
explain differences in the level of support for FDI across countries, this variation is worthy of further
investigation.
The dependent variable is reduced to a dummy variable because it allows for a simpler interpretation of the
model, but the findings are equivalent with a categorical variable and an ordered probit model.
8
37
In studies of preferences on foreign economic policies, education is commonly used as a proxy
for skill level and labor market opportunity. 9 I measure education in three different ways following the
coding scheme in Pandya (2010), which also examines the Latinobarometer data. The variable YEARS OF
EDUCATION captures the number of years of education as reported by respondents. EDUCATION LEVEL
is a variable with four categories: less than primary school, primary school, secondary education, and
higher education. Another set of dummy variables measures the highest level of education completed
(UNIVERSITY, SOME UNIVERSITY, VOCATIONAL TRAINING, SECONDARY). In this case, the omitted
category is anyone with less than a secondary school education. Another way to measure skill level is to
look at occupation or income directly. Income levels are not reported in Latinobarometer surveys, but
there are several occupational measures. Two dummy variables, WORKS IN OFFICE and WRITING &
NUMBERS, measure whether respondents work in an office and whether they write or use numbers in
their current job, which indicate higher skill levels. Together, these education and occupation variables
test the hypothesis from the factor model that low-skilled workers support FDI because of its personal
economic benefits.
As in previous studies, I include demographic variables that potentially have an influence on
foreign economic policy preferences in order to control for factors that are linked both to education and
attitudes about FDI. Previous studies have found a strong gender difference in attitudes about
globalization. Women are much more likely to oppose trade openness (Burgoon & Hiscox, 2008), so I
include the variable FEMALE in the model. Marital status may also be related to both economic
prospects and attitudes about foreign investment because married couples are more likely to have two
working-age adults in the household, so I include the variable MARRIED as an indicator of marriage
status. Age can also be a factor in policy opinions and economic evaluations, so I include the variable
For examples, see Scheve and Slaughter 2001 and Mayda and Rodrik 2005 on trade, Pandya 2010 on FDI, Milner
and Tingley 2008 on foreign aid.
9
38
AGE, which is the age of the respondent in years. Studies of trade policy preferences indicate that
homeownership is a significant predictor of attitudes about trade (Scheve & Slaughter, 2001), so I
include a dummy variable HOMEOWNER. I also include a measure of perceptions of JOB INSECURITY.
Pandya (2010) notes that job insecurity could be related to support for FDI because those who are
worried about their current position may be interested in new investment that creates more jobs. On
the other hand, foreign investment increases job insecurity in some cases (Scheve & Slaughter 2004), so
individuals who are afraid of losing their job may be wary of increased foreign investment. In addition, I
use the measure of partisanship from the question, "In politics, people normally speak of "left" and
"right." On a scale where 0 is left and 10 is right, where would you place yourself? The RIGHT SCALE
variable captures all values from 0 to 10. Dummy variables condense this scale to LEFT (0-3), RIGHT (710), and CENTER (4-6), with center as the omitted category in the regression models.
Since both education and economic self-interest are likely to be correlated with current
employment status, it is important to consider the effects of employment on FDI preferences.
Employment status includes several categories: WORKING, UNEMPLOYED, RETIRED, HOMEMAKER, and
STUDENT. If labor market potential is important, then those who are not working or planning to work
should have different preferences than those who are working or looking for work.
Within the category of working individuals, there are dummy variables for different occupations
(PROFESSIONAL, BUSINESS OWNER, FARMER, SELF-EMPLOYED SALES, MANAGER OR EXECUTIVE, and
PUBLIC SECTOR). The manager or executive variable only includes private sector employees. The
omitted reference category is non-management private sector employees that are not self-employed.
The hypothesis based on the factor model is that low-skilled employees should be the group most open
to FDI, which means the coefficients on professional, business owner, and executive should be negative.
39
-0.00601
(0.0155)
PublicSector
-0.0269
(0.0600)
Female
-0.167***
(0.0362)
Age
0.00247*
(0.00131)
Married
0.116***
(0.0371)
Constant
0.285***
(0.0905)
Observations
6,829
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Job Insecurity
Secondary
Vocational
Some University
University
Education Level
VARIABLES
Years of Education
(1)
FDI Beneficial
0.0295***
(0.00458)
(0.0819)
6,574
0.374***
-0.00491
(0.0160)
-0.0237
(0.0614)
-0.163***
(0.0371)
0.00189
(0.00130)
0.109***
(0.0380)
0.144***
(0.0221)
1995
(2)
FDI Beneficial
0.332***
(0.0666)
0.200***
(0.0682)
0.213***
(0.0520)
0.0686
(0.0504)
-0.0125
(0.0155)
-0.0175
(0.0600)
-0.169***
(0.0360)
0.000948
(0.00130)
0.112***
(0.0369)
0.505***
(0.0815)
6,948
(3)
FDI Beneficial
-0.0629***
(0.0130)
-0.0447
(0.0407)
-0.172***
(0.0246)
0.00116
(0.000936)
0.0553**
(0.0257)
0.701***
(0.0784)
13,944
(1)
FDI Beneficial
0.0326***
(0.00311)
(0.0401)
-0.169***
(0.0242)
-0.000188
(0.000926)
0.0508**
(0.0254)
0.962***
(0.0713)
14,419
-0.0626***
(0.0130)
-0.0486
(0.0407)
-0.175***
(0.0246)
0.000418
(0.000916)
0.0519**
(0.0257)
0.883***
(0.0707)
13,944
(0.0401)
-0.168***
(0.0246)
0.00329***
(0.000943)
0.00654
(0.0258)
0.552***
(0.0776)
14,169
-0.0389***
(0.0129)
-0.103**
(0.00311)
0.0289***
(0.0402)
-0.170***
(0.0246)
0.00248***
(0.000922)
0.00398
(0.0258)
0.730***
(0.0698)
14,169
-0.0395***
(0.0129)
-0.102**
0.123***
(0.0145)
1998
(3)
(1)
(2)
FDl Beneficial FDI Encouraged FDI Encouraged
0.408***
(0.0438)
0.219***
(0.0423)
0.240***
(0.0360)
0.0882**
(0.0350)
-0.0626***
(0.0128)
-0.0520
(0.0144)
0.151***
(2)
FDI Beneficial
Table 3: Baseline Model of FDI Preferences
(0.0396)
-0.168***
(0.0242)
0.00224**
(0.000935)
0.0131
(0.0255)
0.762***
(0.0706)
14,657
(0.0385)
-0.126***
(0.0235)
0.00103
(0.000851)
-0.724
(0.915)
0.562***
(0.0715)
14,047
(0.0386)
-0.126***
(0.0235)
0.000669
(0.000835)
-0.760
(0.914)
0.635***
(0.0658)
14,047
2001
(3)
(1)
(2)
FDI Encouraged FDI Encouraged FDI Encouraged
0.0163***
(0.00289)
0.0782***
(0.0141)
0.340***
(0.0433)
0.283***
(0.0432)
0.176***
(0.0361)
0.0661*
(0.0351)
-0.0381***
-0.00520
-0.00507
(0.0127)
(0.0119)
(0.0119)
-0.107***
-0.0975**
-0.101***
(0.0386)
-0.127***
(0.0235)
0.000547
(0.000852)
-0.793
(0.914)
0.662***
(0.0654)
14,047
0.226***
(0.0486)
0.108**
(0.0438)
0.122***
(0.0322)
0.0743**
(0.0349)
-0.00517
(0.0119)
-0.100***
(3)
FDI Encouraged
Baseline Model: Education and Skills
I begin with a baseline model of the political economy of FDI, which replicates the model in
Pandya (2010). It establishes there is a positive relationship between education and support for FDI,
which is contrary to what one would expect based on factor endowments. The baseline results in Table
3 show that education is strongly related to both beliefs that FDI is beneficial for development and
support for encouraging FDI. The result holds regardless of which measure of education or skills is used.
Table 4 indicates that the alternative measures of skill (WORKS IN OFFICE, WRITING & NUMBERS) are
associated with support for FDI as well. This presents a puzzle for political economy research. Either the
factor endowment theory is incorrect about who benefits from FDI, or there is another explanation of
FDI preferences beyond the economic one. Education is one proxy for skill level, but occupation is a
more direct measure of the potential economic benefits from FDI. The regression in Table 5 reports the
results of a model that includes occupation.
Table 4: Baseline Model with Skill Levels
1998
1995
VARIABLES
Writing & Numbers
(1)
FDI Beneficial
0.147**
(2)
FDI Beneficial
Job Insecurity
-0.0175
Public Sector
(0.0155)
0.0332
(0.0593)
Female
Age
-0.172***
(0.0358)
-0.000679
(0.00121)
0.109***
(0.0368)
0.657***
Constant
(0.0685)
6,947
Observations
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Married
(2)
FDI Beneficial
0.0911
(0.0757)
-0.0155
(0.0155)
0.0395
(0.0603)
-0.171***
(0.0358)
-0.000707
(0.00121)
0.109***
(0.0368)
0.671***
(0.0680)
6,947
(1)
FDI Encouraged
0.185**
(2)
FDI Encouraged
(0.0721)
(0.0702)
(0.0730)
Office
(1)
FDI Beneficial
0.167**
0.160***
0.0947*
-0.0751***
(0.0129)
-0.000344
(0.0398)
(0.0537)
-0.0750***
(0.0129)
-0.0141
(0.0404)
(0.0515)
-0.0449***
-0.177***
(0.0244)
-0.00161*
(0.000890)
-0.179***
(0.0244)
-0.00157*
(0.000890)
0.0555**
(0.0256)
1.139***
(0.0662)
14,030
0.0559**
(0.0256)
1.132***
(0.0663)
41
14,030
-0.0451***
(0.0128)
-0.0697*
(0.0392)
-0.166***
(0.0245)
0.000667
(0.000900)
0.0115
(0.0257)
(0.0128)
-0.0745*
(0.0398)
-0.168***
(0.0245)
0.000665
(0.000900)
(0.0655)
0.0119
(0.0257)
0.934***
(0.0656)
14,256
14,256
0.937***
This analysis shows that those in professional occupations (doctor, lawyer, architect, etc.) and those
who own their own business are more supportive of FDI than non-management private sector workers.
These are not the occupations that are expected to benefit most from FDI according to the factor model.
In fact, these are the groups that are expected to lose from FDI. Business owners face increased
competition from multinational firms when FDI expands. Professionals often work in their own practice
and are less likely to be hired by foreign companies than a typical private sector worker. Yet, they are
the most supportive of openness to FDI. They are also a more highly educated group with professionals
Table 5: FDI Preferences According to Occupation
1995
(1)
FDI Beneficial
VARIABLES
Professional
0.317**
(0.161)
0.172*
Business Owner
(0.0922)
0.0449
Farmer
(0.256)
0.0694
Self-employed Sales
(0.0710)
0.207**
Manager or Executive
(0.0967)
-0.00505
Public Sector
(0.0671)
-0.0712***
Job Insecurity
(0.0220)
Female
-0.131**
(0.0526)
-0.00149
Age
(0.00217)
0.0681
Married
(0.0546)
0.810***
Constant
(0.115)
Y
Country Dummies
3,463
Observations
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
42
1998
2001
(1)
FDI Beneficial
0.328*
(0.169)
-0.0660
(0.0809)
0.0251
(0.218)
-0.0666
(0.0808)
0.115
(0.0902)
-0.0290
(0.0415)
-0.0740***
(0.0165)
-0.153***
(0.0332)
-0.00279**
(0.00135)
0.0313
(0.0336)
1.284***
(0.0922)
Y
9,006
(1)
FDI Encourage
0.000587
(0.0815)
0.0921*
(0.0529)
-0.00123
(0.0766)
-0.0530
(0.0387)
0.0588
(0.0547)
-0.129***
(0.0445)
-0.00963
(0.0147)
-0.0663**
(0.0307)
-0.000393
(0.00117)
-0.772
(0.897)
0.823***
(0.0820)
Y
9,202
with 15 years of education on average while non-professionals have only 9 years. These results are
surprising in light of the standard factor model theory, and they offer further support to the education
puzzle regarding globalization preferences in developing countries.
In order to explore the relationship between education and the benefits from FDI further, I
examine how FDI preferences vary for retirees. Retirees offer an important test of the role of education
in FDI. If education is a proxy for labor market outcomes, then it should have a different effect for
retirees than workers because FDI is unlikely to affect personal income for retirees regardless of their
level of education. For students, the measure of education reflects only the level of education already
10
completed, so it is not an ideal indicator for future earning potential. For both students and the
unemployed, education has a direct influence on future income. It determines the type of jobs and
potential wages that they should expect. For homemakers, FDI may have an impact on income if they
choose to reenter the work force, but for those who do not plan to seek employment outside the home,
FDI would not affect personal income. Homemakers could still be concerned about the effects of FDI on
household income if the head of household is working or looking for work. However, if education only
affects FDI through earning potential, there should be no relationship between education and FDI
preferences for retirees according to the factor model. Table 6 shows the baseline model of FDI
preferences for retirees only." The results indicate that education has a significant effect on opinions
about FDI even for those who are no longer in the workforce. Despite the fact that FDI would not
influence personal income, retirees with more education are more supportive of FDI. The size of the
effect is quite large, and is similar in scale to that in the original model.
10 Some students will eventually complete higher levels of education, and those plans could influence their
perception of the value of FDI for their own income.
"1 The model is the same except that JOB INSECURITY and PUBLIC SECTOR are not included because they are not
applicable to those who are no longer in the work force.
43
Table 6: Modelfor Retirees Only
1995
1998
2001
(2)
(1)
(2)
(1)
(2)
(1)
VARIABLES
FDI Beneficial FDI Beneficial FDI Beneficial FDI Beneficial FDI Encourage FDI Encourage
Education Years
0.0449***
0.0459***
0.0240*
(0.0152)
(0.0121)
(0.0143)
Education Level
0.219***
0.192***
0.0656
(0.0790)
(0.0572)
(0.0652)
Female
-0.204
-0.222
-0.214*
-0.218*
-0.246**
-0.245**
(0.140)
(0.142)
(0.117)
(0.117)
(0.121)
(0.120)
Age
-0.00614
-0.00761
-0.00235
-0.00376
-0.00169
-0.00297
(0.00654)
(0.00658)
(0.00512)
(0.00505)
(0.00589)
(0.00580)
Married
0.0608
0.0414
0.355***
0.355***
(0.137)
(0.138)
(0.115)
(0.115)
Constant
0.578
0.751
0.403
0.684
0.392
0.595
(0.494)
(0.488)
(0.453)
(0.433)
(0.460)
(0.430)
Country Dummies
Y
Y
Y
Y
Y
Y
Observations
601
592
753
753
537
537
Robust standard errors in parentheses
p<0.01, ** p<0.05, * p<0.1
This evidence calls into question the interpretation that the link between education and FDI is
only or even primarily a result of the expected benefits of FDI on personal income. Instead, education
seems to have a long-term effect that lasts into the non-working years. Education is strongly associated
with views on FDI despite the lack of an influence on personal income.
While this analysis shows that there is a relationship between education and FDI preferences, it
raises questions about whether education represents differences in skill level that proxy for income
potential. This lends credibility to the cosmopolitan ideology and economic knowledge hypotheses, but
does not distinguish between them. The results for retirees contradict the finding from Pandya (2010, p.
405), "Previous work on trade and immigration preferences shows that education informs and socializes
individuals to be more receptive to international influences, independent of the expected effects of
these flows on income. By contrast, I find no evidence to support these alternate mechanisms by which
education could influence preferences." In fact, there is evidence in the Latinobarometer data that
education has an impact apart from the expected effects on income. The challenge is to determine how
44
education influences preferences toward FDI. The baseline model and the analysis of retirees present
two important puzzles that differ from the recent work on FDI preferences. First, the results do not fit
the factor model for developing countries, where lower skilled workers are expected to support FDI.
Second, the analysis of retirees indicates that education represents more than just earning potential, so
current interpretations of the result are incorrect.
Economic Perceptions: Egocentric and SociotropicModels of FDI Preferences
One hypothesis that could explain the flaws in the factor model is that economic evaluations
influence FDI preferences, and groups with different education levels have different assessments of the
performance of the economy. This may be an omitted variable in the baseline model. This analysis
addresses perceptions of the economy to test whether national or individual economic conditions
influence attitudes about FDI. All variables are measured with higher values indicating more favorable
economic conditions. These are measured using the following questions. NATIONAL ECONOMY
CURRENT measures the response to "In general, how would you describe the present economic
situation of the country? Would you say that it is very good, good, about average, bad, or very bad?"
These are measured on a scale from 1 to 5 with 1 representing very bad and 5 representing very good.
Responses to "Do you consider the current economic situation of the country to be better, the same or
worse than 12 months ago?" are coded as 0 for worse, 1 for the same, and 2 for better in the NATIONAL
EOCNOMY CHANGE variable. The NATIONAL ECONOMY FUTURE is coded similarly with 0 indicating the
economy is expected to get worse, 1 stay the same, and 2 get better. The same questions are also asked
about respondents' personal economic situation, and the coding follows the same procedure for
PERSONAL ECONOMY CURRENT, PERSONAL ECONOMY CHANGE, and PERSONAL ECONOMY FUTURE.
The 1995 Latinobarometer survey includes an additional question that asks, "Would you say that this
country is progressing, at a standstill, or in decline?" The answers are represented by a dummy variable
for those who responded DECLINE and those who responded PROGRESS.
45
The results, reported in Table 7, indicate that economic perceptions are highly correlated with
FDI preferences at both the national and individual level. These responses reflect self-reported
perceptions of the economy, not official economic statistics. They represent a subjective interpretation
of economic events, which is appropriate because people can interpret the same economic conditions
differently. It is the subjective rather than objective state that matters for public opinion. The results in
Table 7 show that both national economic perceptions and individual economic perceptions are strong
predictors of FDI preferences even when accounting for differences in levels of education and other
standard determinants of policy preferences. The results are similar when respondents are asked about
the current economy, retrospective growth, or future growth expectations. More positive economic
evaluations are associated with support for FDI. The question about national economic decline is the
best predictor of FDI preferences. Those who believe the economy is in decline are significantly more
likely to oppose FDI. These results indicate that people do not see FDI as a solution to economic
problems. Instead, foreign investment is more desirable when the domestic economy is doing well, and
economic decline contributes to more protective attitudes. Foreign investment may be blamed for poor
economic conditions or at least viewed as undesirable when domestic firms are in a weak position.
Perceptions of the national economy and personal economic experiences are highly correlated
in these surveys.12 As other studies have noted, individuals often generalize from their own experience
when assessing the national economy (Mansfield & Mutz, 2009). The results are consistent with
sociotropic models of preference formation that suggest individuals are concerned with the overall
economy. There is still a significant relationship between education and FDI preferences, but it is
reduced when economic evaluations are included.
The R-squared value for individual and national economic conditions ranges from .40 to .55 across the surveys,
which implies about half of the variation in personal economic circumstances is accounted for by national
economic conditions.
12
46
Table 7: Economic Perceptions and Attitudes about FDI
Variables
National Economic Decline
7
6
5
4
3
2
1
FDI Beneficial FDI Beneficial FDI Beneficial FDI Beneficial FDI Beneficial FDI Beneficial FDI Beneficial
-0.276***
(0.0450)
0.0631***
0.0986***
National Economy (Current)
(0.0152)
(0.0235)
National Economy (Change)
Personal Economics (Current)
0.0679***
(0.0251)
(0.0170)
0.114***
0.0350*
(0.0286)
(0.0198)
Personal Economics (Future)
0.00244*
(0.00129)
0.107***
(0.0380)
0.440***
-0.106
(0.0814)
(0.110)
YV
-0.0131
(0.0623)
-0.160***
(0.0376)
0.00268**
(0.00132)
0.119***
(0.0386)
0.260***
(0.0864)
Y
6,557
6,434
(0.0220)
0.000982
(0.0160)
Public Sector
Female
-0.0231
(0.0615)
-0.159***
(0.0370)
Age
Married
Constant
Coumntri Duimmies
ynn
n~mp
0.136***
0.126***
(0.0224)
0.00493
(0.0161)
-0.0113
(0.0621)
-0.152***
(0.0373)
0.00254*
(0.00130)
0.113***
(0.0381)
0.138***
Y
6,632
Observations
Note: Robust standard errors in parentheses.
*** p<0.01, ** p<0.05, * p<0.1
(0.0197)
0.0865***
Personal Economics (Change)
Job Insecurity
0.0663***
0.128***
(0.0302)
National Eocnomy (Future)
Education Level
0.0747***
(0.0202)
0.0776***
(0.0296)
(0.0223)
-0.00333
(0.0163)
0.143***
(0.0314)
0.148***
(0.0244)
0.144***
(0.0145)
0.000625
-0.0484***
(0.0178)
-0.0107
(0.0132)
(0.0678)
-0.131***
(0.0410)
0.00333**
(0.00147)
0.103**
(0.0427)
0.0626
(0.0946)
Y
5,404
-0.0533
(0.0409)
-0.172***
(0.0247)
0.00107
(0.000925)
0.0546**
(0.0258)
0.471***
(0.0925)
Y
13,900
0.155***
(0.0146)
-0.0584***
(0.0132)
-0.0461
(0.0413)
-0.176***
(0.0248)
0.000530
(0.000929)
0.0498*
(0.0260)
0.808***
(0.0760)
Y
13,681
0.0558***
(0.0205)
0.158***
(0.0155)
-0.0585***
(0.0140)
-0.0252
(0.0442)
-0.167***
(0.0264)
0.000845
(0.000984)
0.0310
(0.0278)
0.681***
(0.0860)
Y
12,6
Nationalism, Ideology, and Country of Origin
Although earlier analyses explore partisanship, the measure used is not a typical measure of
left-right preferences because it is on a 0-10 scale. In this analysis, I explore an alternative measure that
splits partisanship into 3 categories, left, right, and center. The results in Table 8 suggest that both right
and left ideologies are associated with less support for FDI relative to the center. However, the left is
generally more opposed to FDI. These results stand in contrast to recent work on FDI that suggests
parties on the Left are more likely to have open FDI policies and to receive FDI that complements labor
(Pinto and Pinto 2008, Pinto 2013).
There are several possible explanations for why the results diverge. First, it may be that
individuals on the left are more likely to oppose FDI, but Left governments support it anyway because of
the expected economic benefits. If foreign investment has low salience for voters, then politicians may
not cater to public opinion on the issue. Another possibility is that the cases of Argentina and South
Korea that form the basis for Pinto's argument are abnormal and the relationship does not hold in the
larger Latinobarometer dataset.
48
Table 8: Nationalism, Ideology, and FDI Preferences
VARIABLES
University
Some University
Vocation
1995
FDI Beneficial
FDI Beneficial
0.395***
(0.0687)
0.422***
(0.0478)
0.215***
0.336***
2001
FDI Encouraged
0.211***
(0.0523)
(0.0694)
0.199***
(0.0463)
0.216***
0.220***
(0.0471)
0.279***
(0.0474)
0.135***
(0.0529)
(0.0400)
0.0680*
(0.0402)
0.0613
(0.0357)
0.0411
(0.0390)
-0.0669***
(0.0392)
-0.0392**'
(0.0141)
(0.0390)
(0.0443)
-0.0671
(0.0440)
-0.109***
0.0147***
(0.00485)
High School
0.0777
Job Insecurity
(0.0514)
-0.0111
(0.0158)
Public Sector
I998
FDI Encouraged
(0.0141)
-0.0267
-0.0553
(0.0611)
0.107**
(0.0483)
0.114***
-0.0178
(0.0132)
(0.0421)
Homeowner
0.0639
(0.0431)
National Pride
0.146***
(0.0241)
Right Scale
-0.00384
0.00247
0.00164
(0.00465)
-0.158***
(0.0267)
(0.00465)
Female
(0.0364)
-0.176***
-0.162***
(0.0267)
-0.136***
(0.0262)
-0.000618
0.00155
0.000503
(0.00103)
0.0566**
(0.00104)
0.0318
(0.000948)
(0.0280)
0.964***
(0.0819)
11,745
(0.0281)
Age
Married
(0.0367)
0.000398
(0.00133)
0.114***
(0.0376)
Constant
0.0690
(0.112)
6,769
Observations
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
49
(0.0811)
0.625***
(0.0763)
11,903
11,422
0.735***
Table 9: Partisanship and FDI Attitudes
1995
1998
2001
(1)
(2)
(1)
(2)
(1)
(2)
VARIABLES
fdiben
fdiben
fdiben
fdiben
fdienc
fdienc
Right (scale 0-10)
0.0400***
(0.00819)
Right
Left
Education Level
0.00300
0.0147***
(0.00475)
(0.00486)
-0.112***
-0.0547*
0.0532**
(0.0412)
(0.0280)
(0.0263)
-0.378***
-0.128***
-0.0227
(0.0529)
(0.0353)
(0.0363)
0.171***
0.144***
0.152***
0.148*** 0.0783*** 0.0809***
(0.0251)
(0.0223)
(0.0157)
(0.0144)
(0.0155)
(0.0142)
Job Insecurity
-0.00909
-0.00417 -0.0662***-0.0612***
-0.0179
-0.00427
Public Sector
(0.0184)
0.0113
(0.0160)
-0.0214
(0.0143)
-0.0241
(0.0130) (0.0132) (0.0119)
-0.0470 -0.111*** -0.101***
(0.0686)
(0.0618)
(0.0451)
(0.0407)
Female
Age
(0.0420)
(0.0386)
-0.165*** -0.166*** -0.164*** -0.175*** -0.135*** -0.128***
(0.0426) (0.0373)
(0.0270)
0.00209
0.000307 0.000331 0.000745 0.000598
0.00149
(0.0246)
(0.0262)
(0.0236)
(0.00155) (0.00130) (0.00101) (0.000917) (0.000929) (0.000836)
Married
0.112**
(0.0441)
Constant
0.180*
(0.106)
0.106***
(0.0382)
0.517***
0.0593**
(0.0283)
0.859***
(0.0877)
(0.0814)
Country Dummies
Y
Y
Observations
4,992
6,574
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
0.0527**
(0.0257)
0.940*** 0.589***
(0.0734) (0.0765)
-0.758
(0.926)
0.614***
(0.0681)
Y
Y
Y
Y
11,408
13,944
11,422
14,047
Conclusion and Policy Implications
Given the scope of these surveys, the generalizability of the results should be considered. From
these three surveys, it is unclear whether the relationship holds beyond Latin America or if it is a special
case. However, the next section takes steps to address the generalizability by analyzing a broader
dataset and comparing the results to this one. These surveys are from 1990s and early 2000s, so they
do not speak to current perceptions of FDI. They are still useful for exploring the factor model, which is
intended to be a universal model that applies across time. However, the levels of support for FDI may
have changed significantly, so the results are informative about the determinants of FDI preferences
50
rather than indicating current public opinion. These findings highlight some important differences
across countries, but it is beyond the scope of this project to explore them.
Even with these limitations, the analysis provides a compelling counterweight to the recent
studies on public opinion and FDI. To take one example, Pandya suggests, "Efficiency-minded politicians
can tap into the broad support for FDI among labor to build a constituency in support of economic
integration with the world" (p. 406). This policy is misguided considering much of the support for FDI
comes from professionals and business owners. In Latin America, as in many developing countries,
those with the highest levels of education are not necessarily employed by foreign multinationals. Highskilled factory workers are likely to be in the middle of the education pool. They are high-skilled and
educated relative to farmers and self-employed people, but not compared to doctors and business
owners. The surveys do not support the idea of higher support for FDI among the private-sector wage
earners who are most likely to represent the labor constituency. Support for FDI in Latin America is
quite high on average, so labor unions and workers in the manufacturing sector may provide a source of
support for FDI. However, the strongest supporters are actually business owners and professionals.
Therefore, politicians who are seeking support for liberalization of FDI should look to educated
individuals who own their own business or work in a professional occupation and expect greater
opposition from labor.
51
VIII.
Anti-American Sentiment and Attitudes on FDI
The second part of the empirical analysis focuses on the question of how attitudes about
nationalism and major economic powers influence preferences on FDI. This builds on the previous
analysis of opinions about FDI in Latin America, but explores new questions using a survey that covers a
broader range of countries. This analysis relies on the Voice of the People Survey, which was conducted
by Gallup International in 2006 in 57 countries around the world. This survey provides a rich source of
information about globalization preferences including attitudes about FDI, and it is more recent than the
Latinobarometer surveys. This paper represents the first in-depth analysis of this data to study the
determinants of globalization preferences, and as such, offers an original contribution to this field of
inquiry.
The Gallup surveys were designed to effectively measure public opinion on globalization and
foreign investment. In more than 90 percent of the countries surveyed, a nationally representative
sample was selected. However, in a handful of countries, the sample is representative only of the urban
population."
Interviews were either held face-to-face or over the telephone. Surveys included 1,000
respondents per country.
This survey measures opinions about globalization and foreign investment. There are two
dependent variables in the analysis, Pro-FDI and Pro-Globalization. Pro-FDI measures the response to
the following question: "There are different opinions about allowing foreign investment in our country.
Some people think that foreign investment is necessary and has a positive influence on our economy.
Others say that foreign investment is dangerous because it allows outsiders too much influence over our
affairs. Which view is closer to your own view?" Respondents who chose "Foreign investment is
necessary and positive" are coded as 1 and those who chose "Foreign investment is dangerous" are
coded as 0. The wording of this question is intended to present both sides of the issue, but the words
1
The urban only observations include Bolivia, Cameroon, the Dominican Republic, Venezuela, and Vietnam.
52
Table 10: Descriptive Statistics of the Voice of the People Survey
Variable
ProFDI
Max
Std. Dev. Min
Mean
Obs
50735
0.70
0.46
0
1
ProGlobalization
60593
0.38
0.48
0
1
Income
46990
60145
60593
60484
60593
60593
1.68
2.09
0.51
2.07
0.19
0.71
0.71
0.50
0.92
1
1
0
1
3
3
1
4
0.17
0.39
0.38
0
0
1
1
46962
0.51
0.50
0
1
Education
Female
Age
Right
Left
PositiveUS
"outsiders" and "dangerous" may prime negative feelings about the issue. A related study on trade
policy found that mentioning job losses stimulated negative associations regardless of whether the
benefits of trade were mentioned (Hiscox, 2006).
The Pro-Globalization variable derives from the question, "Overall, with regard to globalization,
do you think that for our country it is a good thing, a bad thing, or neither good, nor bad?" Responses
are coded as 1 for "a good thing" and 0 for "a bad thing." Because foreign investment is one aspect of
the larger phenomenon of globalization, it is not surprising that policy preferences on these issues are
linked. The scatterplot in Figure 3 shows country averages on the two variables. In every country
except Gabon, FDI receives more support than globalization. The countries above the fitted line have
more positive attitudes about FDI than predicted given their support for globalization. The ones below
the line are more negative about FDI given their support for globalization. Across countries, there is
wide variation in support for FDI, and many countries' citizens are close to evenly split on the issue. At
the individual level, the correlation between support for FDI and support for globalization is .27, which
means there is a clear positive relationship but also substantial variation that cannot be explained by the
other policy preference. The analysis that follows explores both questions independently.
53
Support for FDI is Correlated with Support for Globalization
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Figure 3: Correlation between Supportfor FDI and Globalization
Baseline Model
As in the earlier empirical analysis, it is useful to establish a baseline model of FDI preferences
based on the standard political economy factor model in order to compare it with the other hypotheses.
For the baseline model, measures of income and education are the primary determinants of preferences
of FDI and globalization. Income is measured by the quintile of household income with 1 representing
the bottom 20 percent of income earners and 5 the top 20 percent. The actual values for income
depend on the distribution of income in each country, so using quintiles allows for comparability.
However, the research design focuses on differences within each country rather than across countries,
so it is not important that these scales line up exactly across borders. Education is measured in two
different ways. Education is a categorical variable that is 1 for no education or primary only, 2 for
completion of secondary school, and 3 for university education. Alternatively, education can be
measured with dummy variables for Secondary and University.
54
Support for Globalization Around the World
Source: 2006 Voice of the People Survey and author's calculations
% Support for Globaliz
f
(0.44,0.81]
-. (0.33.0.441
[015,0.25]
0
No data
Figure 4: Support for Globalization around the World
Support for FDI Around the World
Source: 2006 Voice of the People Survey and authors calculations
4
% Support FDI
(0.68,0.771
0,0.60]
Figure 5: Support for FDI around the World
55
Table 11: Baseline Model of FDI Preferences
Variables
(1)
Education
0.263***
(2)
(3)
0.225***
(0.0199)
(0.0257)
University
0.506***
High School
(0.0467)
0.228***
(0.0426)
Income
Female
(4)
0.155***
0.108***
(0.0242) (0.0253)
-0.124*** -0.150*** -0.128*** -0.120***
Age
(0.0262) (0.0307) (0.0330) (0.0332)
-0.0689***-0.0698***-0.0920***-0.0638***
(0.0150) (0.0180) (0.0191) (0.0196)
Right
-0.000347
Left
(0.0357)
0.0703**
(0.0354)
Right-leaning
-0.0242
-0.0191
-0.0127
(0.0163)
(0.0177)
(0.0179)
1.178***
1.577***
1.491***
1.165***
(0.0656)
(0.0883)
(0.109)
(0.116)
Country Dummies
Y
Y
Observations
44,877
33,074
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Y
28,522
Y
28,417
Constant
There are control variables in this analysis for gender, age, and political ideology. Female is
measured as 1 for women and 0 for men. Age includes four categories: under 30, 30-50, 51-65, and
over 65. Political ideology is measured on a 5-point scale from very left wing to very right wing. There
are also dummy variables for Left and Right ideology.
The results of the baseline models indicate that education is associated with more support for
FDI, which is consistent with the results from the Latinobarometer surveys. Interestingly, this result
holds in both developed and developing countries, which is not what the factor model predicts. As
discussed earlier, the Heckscher-Ohlin model is the standard framework for understanding political
preferences on FDI and predicts that developing nations would see more support for FDI among the
56
least skilled workers. The baseline model also reveals that higher income individuals are more likely to
support FDI. As in previous models, we see that women are more likely to oppose FDI, as are older
people.
The findings from the baseline model imply that the factor model needs to be revised to
better reflect actual opinions about foreign investment in developing countries. The next section
explores possible revisions to the model.
Table 12: Anti-American Sentiment and FDI Preferences
Basic Model
(2)
(1)
0.135***
0.134***
Income
(0.0293)
(0.0294)
0.206***
0.220***
Education
(0.0298)
(0.0301)
-0.107***
-0.124***
Female
(0.0384)
(0.0385)
-0.0645*** -0.0592***
Age
(0.0225)
(0.0226)
-0.0347*
-0.0512**
Right-leaning
(0.0205)
(0.0207)
0.339***
Positive US
(0.0443)
-0.150***
Anti-US (factor analysis)
(0.0370)
1.224***
1.066***
Constant
(0.134)
(0.135)
y
y
Country Dummies
22,118
22,118
Observations
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.l
Variables
Developing
(3)
0.124***
(0.0408)
0.121***
(0.0400)
0.0213
(0.0485)
-0.0292
(0.0306)
0.0303
(0.0259)
0.376***
(0.0586)
0.834***
(0.163)
y
12,299
Developed Countries
(6)
(5)
0.141***
0.135***
(0.0394)
(0.0395)
Countries
(4)
0.116***
(0.0405)
0.116***
0.325***
0.304***
(0.0395)
0.0424
(0.0483)
-0.0280
(0.0300)
0.0431*
(0.0259)
(0.0444)
-0.243***
(0.0567)
-0.0827***
(0.0313)
-0.125***
(0.0317)
(0.0443)
-0.227***
(0.0566)
-0.0757**
(0.0310)
-0.104***
(0.0309)
0.337***
(0.0643)
-0.160***
(0.0410)
1.026***
(0.158)
Y
12,299
-0.893***
(0.212)
y
9,819
-0.146**
(0.0680)
-0.699***
(0.210)
y
9,819
Muslim Majority
(8)
(7)
0.0583
0.0504
(0.0703)
(0.0693)
0.0289
0.0394
(0.0550)
(0.0550)
-0.304***
-0.296***
(0.0714)
(0.0712)
-0.0829*
-0.0867*
(0.0469)
(0.0467)
-0.0294
-0.0307
(0.0406)
(0.0403)
-0.183*
(0.107)
-0.0479
(0.0506)
0.282
0.293
(0.213)
(0.212)
v
Y
2,675
2,675
Non-muslim Majority
(10)
(9)
0.137***
0.135***
(0.0303)
(0.0305)
0.223***
0.239***
(0.0322)
(0.0326)
-0.0948**
-0.111***
(0.0407)
(0.0409)
-0.0578**
-0.0637***
(0.0235)
(0.0237)
-0.0361*
-0.0553**
(0.0216)
(0.0219)
0.368***
(0.0463)
-0.162***
(0.0411)
1.194***
1.026***
(0.138)
(0.139)
y
19,443
19,443
Nationalism and Anti-American Sentiment
The primary independent variable is PositiveUS, which is 1 if the respondent chose very positive
or fairly positive when asked, "What is your overall opinion of the United States?" An alternative
variable that captures US sentiment uses factor analysis on multiple questions to create an index of
SentimentUS. The index includes the question above as well as more specific answers about the role of
the United States in foreign policy on both economic and security issues. A positive value suggests that
the respondent believes the US generally plays a positive role in foreign policy issues.
The analysis of support for FDI uses a probit model with PositiveUS or SentimentUS as the
independent variables. Dummy variables for each country are included in the model, which allows for a
different intercept for each country. By including these, the model controls for any cross-country
57
differences in the overall level of support for FDI and serves to explain only the variation across
individuals within a country. This is important because it means that any characteristics that are
constant at the country level do not account for the differences in opinions about FDI. For example,
countries that receive more FDI might be more supportive of it, but this is controlled for in the model
and allows us to see which factors explain variation in individual preferences within the country. The
results indicate that positive attitudes about the U.S. are a strong positive predictor of support for FDI.
This holds in both developed and developing countries. However, the relationship is negative in
countries where Islam is the primary religion. In these countries, positive opinions about the United
States are associated with opposition to foreign investment. This relationship could signify differing
attitudes about investment and banking based on Islamic law, cultural protectionism, or a mistrust of
Western investors. The finding warrants further study.
In order to explore these findings further, I examined the model for each country individually. In
40 out of the 57 countries there is a positive relationship between opinions about the US and opinions
about FDI. That means that no particular country or region is driving these results. However, it also
highlights the fact that this is not a universal phenomenon. Interestingly, opinions about the United
States are a significant predictor of FDI preferences almost twice as frequently as education or income.
Income is significant in only 23 countries and education is significant in only 21.
Coming back to the original factor model, I explore attitudes about globalization by employment
status. The regression of FDI preferences for each of the following groups: workers, the unemployed,
students, housewives, and the retired, shows that among the retired, one's education is not significantly
correlated with one's preferences on FDI when anti-American opinions are taken into account. This
omitted variable, anti-American sentiment, may explain why earlier studies showed a significant effect
for education well into retirement. Anti-American sentiment is negatively correlated with education, so
it may be that attitudes about the U.S. are driving the opinions in other surveys that do not ask this
58
question. If so, future investigation of individual preferences on FDI and globalization will need to
account for positive or negative opinions about the United States and the West if they are to accurately
measure the factors that drive one's beliefs and opinions on foreign investment and globalization.
Table 13: Country Regressions of Attitudes about the US and FDI
Table: Analysis of FDI Preferences by Country
AUT
ARG
ALB
-0.0367 -0.0674
0.136
Income
(0.207)
(0.132)
(0.147)
0.311** 0.324**
-0.168
Education
(0.135)
(0.144)
(0.109)
0.421*** -0.0302 -0.220*
Female
(0.131)
(0.177)
(0.144)
-0.124
-0.0421 0.0539
Age
(0.0827) (0.0953) (0.106)
-0.0625 -0.0297
0.0188
Right-leaning
(0.0747) (0.0805) (0.102)
0.518* 0.483***
-0.0107
Positive US
(0.135)
(0.296)
(0.187)
-0.280
1.146*** -0.573
Constant
(0.459)
(0.471)
(0.414)
389
233
575
Observations
Robust standard errors in parentheses
p<0.01, ** p<0.05, * p<0.1
BGR
0.247**
(0.117)
0.120
(0.0815)
-0.229**
(0.112)
-0.0246
(0.0714)
-0.00264
(0.0553)
0.420***
(0.112)
-0.388
(0.310)
604
GER
GAB
FRA
FIN
0.132
0.208** 0.610***
0.103
(0.145)
(0.0844) (0.0876) (0.155)
0.303*** 0.496*** 0.00557 0.637***
Education
(0.184)
(0.109) (0.0936) (0.119)
-0.115
-0.185 -0.255** -0.235
Female
(0.209)
(0.161)
(0.114)
(0.133)
-0.0571
-0.0119 -0.103
0.0519
Age
(0.108)
(0.0862) (0.0655) (0.128)
0.138** -0.00607 0.0152 -0.272**
Right-leaning
(0.0544) (0.0642) (0.0582) (0.118)
0.487**
0.281
0.290* 0.511***
Positive US
(0.237)
(0.179)
(0.129)
(0.155)
-0.384
-1.102*** -1.144*** -0.692
Constant
(0.639)
(0.435)
(0.358)
(0.398)
292
274
551
465
Observations
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.l
Income
CON
CMR
CHL
CAN
BOL
-0.0131 -0.571**
0.128
-0.00870 0.474*
(0.286)
(0.244) (0.0874) (0.192)
(0.141)
-0.0627
0.0784
0.156
0.236
0.218
(0.212)
(0.245)
(0.124)
(0.186)
(0.135)
-0.434
-0.336
-0.143
-0.616*** -0.480**
(0.279)
(0.216)
(0.125)
(0.219)
(0.184)
-0.239** 0.0602 -0.00901 -0.0148 -0.0405
(0.242)
(0.154) (0.0682) (0.120)
(0.104)
-0.134
0.117
-0.0409 0.0109
0.103
(0.142)
(0.0745) (0.0789) (0.0697) (0.128)
0.299
0.243 0.690*** 0.798***
0.464***
(0.398)
(0.254)
(0.129)
(0.218)
(0.178)
-0.0790 1.666**
-0.692
-0.482
0.786
(0.751)
(0.809)
(0.440)
(0.563)
(0.528)
189
120
512
185
300
ICE
HKG
GRC
-0.0511 0.0550
0.167*
(0.104)
(0.0947) (0.107)
0.189**
0.436*** 0.0814
(0.0943) (0.140) (0.0914)
-0.0282 -0.0766 -0.335**
(0.143)
(0.140)
(0.131)
0.114
-0.0488 0.0113
(0.0717) (0.123) (0.0944)
0.0702
0.195*** 0.0458
(0.0675) (0.166) (0.0732)
0.126 0.483***
0.330*
(0.161)
(0.151)
(0.187)
-0.173
-1.162*** 1.144*
(0.333)
(0.653)
(0.395)
474
698
458
59
IND
IDN
-0.0592
0.0757
(0.0998) (0.0926)
0.150
0.298***
(0.0941) (0.125)
0.0347
-0.213**
(0.0975) (0.130)
-0.0191 -0.00834
(0.0697) (0.0925)
0.0609
0.0537
(0.0416) (0.132)
-0.0779 0.892***
(0.191)
(0.129)
-0.0578
-0.289
(0.323) (0.543)
478
759
CRO
0.363***
(0.111)
-0.0273
(0.130)
-0.456***
(0.157)
-0.200**
(0.0822)
0.0664
(0.0699)
0.447***
(0.163)
-0.549
(0.457)
315
DOM
CZR
-0.141
0.0794
(0.154)
(0.102)
-0.0799
0.391**
(0.184) (0.118)
-0.0526 -0.219
(0.163)
(0.130)
-0.0630 -0.125
(0.0654) (0.105)
0.164** -0.230***
(0.0682) (0.0762)
0.874*** 0.0486
(0.204)
(0.134)
-1.200** 2.265***
(0.496) (0.551)
305
468
JPN
ITA
0.0126
0.310*
0.351**
(0.170) (0.131)
(0.167)
-0.0176 -0.0457 0.392**
(0.268) (0.170)
(0.205)
-0.239 -0.714*** 0.102
(0.259) (0.208)
(0.199)
0.156 -0.245**
0.0607
(0.157)
(0.113)
(0.101)
-0.0532 -0.385*** 0.155
(0.161)
(0.0796) (0.121)
0.741** 0.585** 0.707***
(0.230)
(0.257)
(0.330)
0.356
-1.100
-0.202
(0.756)
(0.718)
(0.941)
196
211
321
ISR
MDV
MOR
NLD
NGA
NOR
KOR
KVO
LUX
MCD
MYS
MEX
0.286*** 0.00193
0.0465
0.325**
0.0208
0.317
-0.330*
0.275*
0.0185
0.0842
0.233**
(0.0910) (0.129)
(0.122)
(0.135)
(0.111)
(0.238)
(0.191)
(0.166)
(0.133)
(0.197)
(0.117)
-0.357
0.132
0.235
-0.111
0.231
0.363**
-0.0343
-0.203
0.328
Education
0.173*
0.191**
(0.0894) (0.0960) (0.165)
(0.128)
(0.154)
(0.177)
(0.150)
(0.186)
(0.204)
(0.261)
(0.126)
Female
-0.442*** -0.403** -0.382**
-0.117
-0.307*
0.0737
-0.379
0.00553 -0.322** 0.731***
0.111
(0.110)
(0.172)
(0.186)
(0.169)
(0.168)
(0.228)
(0.282)
(0.228)
(0.163)
(0.262)
(0.188)
-0.111
Age
-0.112
0.115
-0.217* -0.302*** -0.0609 0.00833 -0.271* 0.00835 0.00770 0.311**
(0.173)
(0.141)
(0.216) (0.0779) (0.141)
(0.102)
(0.0855) (0.0972)
(0.120) (0.0906) (0.112)
Right-leaning
-0.00319 -0.0108
-0.106
0.0506
-0.120* 0.253**
0.112
0.197*
-0.104
-0.111
0.0834
(0.0730) (0.0649) (0.0983) (0.0691) (0.0625)
(0.111)
(0.117)
(0.106) (0.0865) (0.112)
(0.100)
Positive US
0.262**
0.458
-0.0911 0.508***
-0.206
0.407* 0.733*** -0.544** 0.677*** 1.178*** 0.403*
(0.252)
(0.186)
(0.321)
(0.219)
(0.371)
(0.205)
(0.169)
(0.195)
(0.235)
(0.283)
(0.112)
Constant
-0.116
0.417
1.006*
0.685
1.632*** -1.785*** 1.798***
0.0152
-0.0614
0.0979
-0.0515
(0.412)
(0.526) (0.573)
(0.442)
(0.524)
(0.602)
(0.637)
(0.679)
(0.555)
(0.860)
(0.484)
417
313
543
388
137
175
422
226
Observations
642
447
270
Robust standard errors in parentheses
p<0.01, ** p<0.05, * p<0.1
Income
PAK
PAN
0.151
0.304*
(0.161)
(0.170)
Education
0.0219
0.138
(0.153)
(0.149)
Female
-0.448*** -0.331*
(0.193)
(0.173)
Age
-0.167 -0.253**
(0.134)
(0.119)
Right-leaning
0.0351
0.0971
(0.0781) (0.124)
Positive US
-0.578*** 0.544**
(0.165)
(0.244)
Constant
0.567
-0.735
(0.530)
(0.623)
Observations
290
189
Robust standard errors in parentheses
p<0.01, ** p<0.05, * p<0.1
Income
PGY
PER
PHL
PRT
-0.326
0.302**
0.0609
0.323*
(0.212)
(0.139) (0.0667) (0.174)
-0.111
0.166
0.164**
0.299*
(0.149)
(0.113) (0.0811) (0.161)
-0.287
-0.178
0.0923
-0.251
(0.194)
(0.148)
(0.103)
(0.219)
0.213
0.195* -0.00270 0.0144
(0.140)
(0.100) (0.0771)
(0.121)
-0.0663
-0.109
-0.0380 -0.0659
(0.0952) (0.0769) (0.0664) (0.101)
0.603** 0.777*** 0.901***
0.145
(0.236)
(0.166)
(0.154)
(0.221)
1.116*
-0.617
-0.477
-0.0870
(0.412)
(0.358)
(0.622)
(0.589)
250
440
745
194
SEN
SER
RMA
RUS
0.180
0.239**
0.0789
0.0956
(0.180) (0.0974) (0.143)
(0.105)
0.0464
0.143
-0.0813
0.155
(0.136)
(0.126)
(0.159)
(0.135)
-0.223
0.0684
0.0459
-0.148
(0.186)
(0.128)
(0.151)
(0.203)
-0.131 -0.183***
0.248
-0.128
(0.109) (0.0678) (0.176) (0.0907)
0.0712
0.0114
0.0259 0.000976
(0.0832) (0.0702) (0.0644) (0.0498)
0.587**
0.261** 0.407** 0.887***
(0.157)
(0.229)
(0.127)
(0.193)
0.490
-0.429 -0.00916
-0.275
(0.459)
(0.557)
(0.453)
(0.535)
312
583
202
350
RSA
0.223**
(0.102)
0.537***
(0.157)
-0.169
(0.151)
0.0540
(0.0734)
-0.171*
(0.0958)
0.266*
(0.153)
-0.710
(0.494)
415
SPN
SWI
THA
TUR
TWN
UK
UKR
USA
VEN
VNM
GHA
-0.227* 0.226***
0.0458
0.0410
-0.0369
-0.0871
0.170
0.162**
0.473**
-0.681
0.0797
(0.136) (0.0742) (0.111)
(0.121)
(0.102)
(0.139)
(0.106) (0.0794) (0.221)
(0.474)
(0.183)
Education
0.185** 0.277*** 0.432***
0.112
0.0587
0.401**
0.165
0.376**
0.103
0.379
0.136
(0.0895) (0.0993) (0.143)
(0.132) (0.0659) (0.165)
(0.118)
(0.165)
(0.146)
(0.462)
(0.135)
Female
-0.234* -0.0456 -0.0512
-0.182 -0.244*** -0.195
-0.323** -0.281** 0.369**
-0.961
0.189
(0.131)
(0.115)
(0.153)
(0.155) (0.0888) (0.193)
(0.145)
(0.121)
(0.177)
(0.811)
(0.186)
Age
-0.0279
-0.122* -0.0922 -0.0131 -0.0586
-0.166
-0.0773
-0.123*
-0.0875
-0.566*
0.271*
(0.0736) (0.0632)
(0.128)
(0.114) (0.0565)
(0.101) (0.0830) (0.0635)
(0.118)
(0.330)
(0.151)
0.137
-0.177** -0.152** -0.0222 -0.374** 0.0844
Right-leaning
-0.0466 -0.274*** -0.0676
0.157
-0.115**
(0.0863) (0.0644)
(0.103)
(0.122) (0.0512) (0.0878) (0.0871) (0.0628) (0.0781) (0.186) (0.0853)
Positive US
0.220
0.247
0.155
0.726***
0.347* 0.573*** 0.0414 -0.0157 0.441**
0.994 -0.754***
(0.202)
(0.704)
(0.237)
(0.160)
(0.157)
(0.195)
(0.190)
(0.146)
(0.200)
(0.157)
(0.155)
Constant
0.791**
0.533
0.481
-0.775
0.542**
-0.891
0.489
-0.579
0.126
4.057**
1.027**
(0.402)
(0.341)
(0.614)
(0.482)
(0.273)
(0.622)
(0.481)
(0.S36)
(0.496)
(1.659)
(0.497)
Observations
493
577
536
348
885
196
414
504
312
62
469
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Income
60
IX.
Conclusion
Foreign direct investment is an important political issue that is often overlooked in political
economy studies. This paper explores public opinion on foreign investment to provide a better
understanding of the non-economic factors that influence FDI preferences. As such it offers a
counterpoint to the existing research and orthodox explanatory models that focus only on economic
self-interest. After identifying the puzzle of higher-skilled workers favoring
FDI in developing countries, I use a series of cross-country surveys (Latinobarometer and Gallup)
on individual beliefs and preferences to show that national economic conditions, political ideologies,
and anti-Americanism all influence FDI preferences. In the case of the Gallup Voice of the People
Survey, this is the first time this dataset has been analyzed for the purpose of measuring political
sentiment on FDI. Revealing new insights, in particular, the power of pro- or anti-American sentiment to
shift predicted results, this improves on the existing research on the politics of FDI and contributes new
and significant findings to the debate about the power and role of economic self-interest in shaping
individual attitudes about economic policy.
While the results of this study raise important questions about how the public thinks about FDI,
there are limitations to the approach of cross-country survey analysis that point to a future agenda for
research in this field. With a longitudinal survey or survey experiment it would be possible to identify
the determinants of FDI preferences while limiting or removing the potential for endogeneity.
These
advanced methodological approaches represent a logical next step for this research. Another direction
for this research would be to link public opinion more directly to policy changes regarding foreign
investment such as the recent proposals to open the oil and gas sector to foreign investment in Mexico
or the nationalization of foreign firms in Argentina. Ultimately, public opinion is most important when it
impacts the policy-making process and there are few studies that link individual attitudes about
globalization to political action and policy decisions. The scope of this study is to understand the factors
61
that drive public opinion on FDI across a large sample of developing countries, but in-depth comparative
study of the domestic politics of particular cases would also be a useful direction for future research.
The results of this work represent a valuable source to aid future scholars in selecting cases for further
inquiry that would illuminate the connections between economic perceptions, political ideologies,
attitudes about foreign countries, and FDI. By contributing new insights on the importance of individual
sentiment about the United States in shaping public opinion on FDI and by offering the first academic
use of the Gallup Voice of the People survey, this research advances the theoretical debate about how
the public thinks about globalization while opening up several new paths of inquiry for future research.
Understanding public sentiment on foreign investment has policy implications in addition to the
implications for political economy theories. Politicians who are interested in building coalitions of
support for changes to foreign investment policy should consider not only the economic circumstances
of these groups, but also the timing of reform given the economy. As I show in the Latinobarometer
chapter, surprisingly, people are more likely to embrace opening to FDI when they believe the economy
is doing well or improving then during periods of decline. This is contrary to the conventional wisdom
that liberalization will only succeed during an economic crisis because a crisis allows policymakers to
undertake unpopular policies that harm special interest groups (Rodrik, 1996). In developing countries,
we see that business owners constitute a strong base of support for greater international economic
integration despite the orthodox political economy logic that these groups should feel threatened by
foreign investment.
A major contribution of this research is to highlight the importance of factors besides individual
earning potential in forming opinions about globalization. The current emphasis on economics in the
literature implies that those who are disadvantaged by globalization can be won over with economic
compensation, but my analysis shows that approach will be less effective than previously thought.
When national economic conditions are deteriorating, policymakers will need to think more broadly
62
about economic growth in order to increase support for open investment policies rather than focus
primarily on the groups that are harmed. Negative opinions about the United States and other
economic partners cannot be changed as easily or directly as compensatory policies. The importance of
anti-American sentiment for opposition to FDI points to larger issues of the perceptions of source
countries that cannot be remedied with purely economic proposals. They require gradual change in the
reputation of partner countries, which can inform the approach policymakers follow on FDI, but is not
entirely under their control.
Foreign investment has been one of the key drivers of economic growth since the Roman and
Han empires. This relationship has only accelerated in the last few decades as developing nations have
gained access to capital, investment, and trade, and the industrialized world has made increased use of
global labor and natural resources. Despite its benefits, FDI continues to be politically controversial, and
we are only beginning to understand all of the reasons why individuals support or oppose greater
openness to investment. This research takes an important step forward by critiquing the existing,
commonly accepted political economy model of FDI preferences and by testing new hypotheses about
the determinants of FDI in a large set of developing countries.
63
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