I am analyzing the effect of human capital on portfolio investment with "institutions" as moderator using a GMM method (panel data of 50 countries). I find that individually, human capital and institutions are positively related to portfolio investment. However, interaction between institutions and human capital is negatively related to portfolio investment. In conclusion, this means that as human capital increases countries with lower institutional quality attract more portfolio investment. Am I right in saying? If right, can this conclusion hold?
"attract" is a cause-related word and may be inappropriate. Association could run in either direction. Look at your time series and model to assess this. Does your model favor your conclusion over the conclusion that among countries with lower institutional quality, only countries with extraordinary portfolio investment are able to increase their human capital. If so, add an explanation of that in the middle of the statement. :-)
Assuming your model is well-specified, I think your interpretation is correct based on the coefficients' sign. But, more precisely, you could say "the marginal effect of human capital on portfolio investment in higher in counties with lower institutional quality." I don't know whether this economically makes sense. But, you should have an intuitive explanation for it.
Suppose Y = aX + bZ + cX*Z +e. Then, dE(Y)/dX = a + cZ
If estimated a > 0, b > 0, c < 0, then the lower the Z, the higher dE(Y)/dX would be.
Gildas Magbonde
Basically, without entering in the theoretical issues, according to the estimates, one could say that the effect of human capital on portfolio investment is larger in countries with low-quality institutions.
