Threshold effect of overall aid and economic freedom
| (1) | (2) | (3) | (4) | (5) | (6) | |
|---|---|---|---|---|---|---|
| FE | FE | FEPT | FEPT | DPT | DPT | |
| Model | Linear | Interaction | (Ins ≤ γ) | (Ins > γ) | (Ins ≤ γ) | (Ins > γ) |
| Threshold (γ) | 5.3879*** (0.0192) | 5.5158*** (0.0610) | ||||
| Foreign aid | −0.0315 (0.1358) | −0.4106* (0.2122) | −0.1194** (0.0534) | 0.1401*** (0.0444) | −1.0814*** (0.1028) | 1.0298*** (0.1140) |
| EF | 0.3298* (0.1718) | 0.6837*** (0.1529) | −0.1710 (0.1664) | |||
| Foreign aid × EF | 0.0301*** (0.0106) | |||||
| GDP | 0.9046*** (0.1070) | 0.7568*** (0.1031) | 0.8497*** (0.0857) | 0.8131*** (0.1039) | 0.1048 (0.0913) | |
| Savings | 0.0048 (0.0052) | 0.0030 (0.0050) | 0.0036 (0.0031) | 0.0055 (0.0042) | −0.0177*** (0.0051) | |
| Openness | 0.0039 (0.0025) | 0.0037 (0.0025) | 0.0031** (0.0013) | 0.0407*** (0.0045) | −0.0440*** (0.0047) | |
| Population | −0.1869** (0.0855) | −0.1429 (0.0949) | −0.1688*** (0.0620) | 0.5190*** (0.1802) | −0.0440*** (0.0047) | |
| Constant | −0.4262 (0.9150) | −0.9262 (1.3266) | -0.4078 (0.6932) | 1.9581 (1.4278) | ||
| Number of i | 62 | 62 | 62 | 62 | ||
| Year fixed effects | Yes | Yes | Yes | Yes | ||
| (1) | (2) | (3) | (4) | (5) | (6) | |
|---|---|---|---|---|---|---|
| Model | ||||||
| Threshold (γ) | 5.3879*** (0.0192) | 5.5158*** (0.0610) | ||||
| Foreign aid | −0.0315 (0.1358) | −0.4106 | −0.1194 | 0.1401 | −1.0814 | 1.0298 |
| EF | 0.3298 | 0.6837 | −0.1710 (0.1664) | |||
| Foreign aid × EF | 0.0301 | |||||
| GDP | 0.9046*** (0.1070) | 0.7568*** (0.1031) | 0.8497*** (0.0857) | 0.8131*** (0.1039) | 0.1048 (0.0913) | |
| Savings | 0.0048 (0.0052) | 0.0030 (0.0050) | 0.0036 (0.0031) | 0.0055 (0.0042) | −0.0177*** (0.0051) | |
| Openness | 0.0039 (0.0025) | 0.0037 (0.0025) | 0.0031** (0.0013) | 0.0407*** (0.0045) | −0.0440*** (0.0047) | |
| Population | −0.1869** (0.0855) | −0.1429 (0.0949) | −0.1688*** (0.0620) | 0.5190*** (0.1802) | −0.0440*** (0.0047) | |
| Constant | −0.4262 (0.9150) | −0.9262 (1.3266) | -0.4078 (0.6932) | 1.9581 (1.4278) | ||
| Number of i | 62 | 62 | 62 | 62 | ||
| Year fixed effects | Yes | Yes | Yes | Yes | ||
Notes:
Columns 1 and 2 apply the fixed-effect estimation (FE), first in the traditional way with only the effect of foreign aid and second, considering the effect of EF and an interaction effect. Columns 3 and 4 apply the fixed-effect panel threshold model (FEPT), and Columns 5 and 6 apply the dynamic panel threshold model (DPT). Ins≤γ and Ins>γ denote the lower and upper regimes, respectively.
The FEPT model only treats foreign aid as the threshold-dependent variable and assumes all control variables have a linear effect on FDI. It does not report the result of the threshold variable EF. The results of the control variables are common for Columns 3 and 4. The DPT model assumes all variables, including the threshold variable, are threshold-dependent variables, yielding two totally differentiated regimes; standard errors in parentheses; ***p < 0.01; **p < 0.05; *p < 0.1
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