Political regimes and foreign investment in poor countries: Insights from most similar African cases

When foreign investors choose to invest in a poor country, do they favor democracies or autocracies? Despite extensive time-series cross-national empirical work on this question, the answer is unclear. To move the debate forward, I use a novel approach based on a most-similar case design. I observe four African countries before, during, and after democratization, and evaluate whether the change in regime type over time affected their ability to attract foreign investment-both relative to their baseline level of investment and in comparison with the investment patterns of four matching countries that did not experience democratization. I also control for the effects of natural resource scarcity and abundance. My difference-in-differences pairwise case analysis indicates the introduction of competitive political institutions is immaterial for foreign investment, whereas the consolidation of these institutions conveys a small investment advantage.