Political
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Political Instability and Economic Growth we find that political instability significantly reduces economic growth, both statis economically. But, we go beyond the current state of the literature by quantitatively importance of the transmission channels of political instability to economic growth. our knowledge, there has been no attempt so far to systematically estimate the effect instability on each factor of production and TFP separately. This contribution goes a advancing the literature, helping the profession understand the most important mechan which political instability affects economic growth. . By identifying and quantitativ the main channels of transmission from political instability to economic growth, this contributes to a better understanding on how politics affects economic performance. More than half of the total negative effects of political instability on real !P per to operate through its adverse effects on total factor productivity "TFP# growth, democracy seems to positively affect human capital growth, as the Polity Scale is st significant, with a positive sign The purpose of this paper is to empirically determine the effects of political insta growth. $sing the system%MM estimator for linear dynamic panel data models on a samp covering up to &'( countries, and )%year periods from &('* to +** , we find that high political instability are associated with lower growth rates of !P per capita. -ega of transmission, we find that political instability adversely affects growth by lower productivity growth and, to a smaller degree, physical and human capital accumulatio economic freedom and ethnic homogeneity are beneficial to growth, while democracy may small negative effect. governments in politically fragmented countries with high degrees of political instability need to address its root causes and try to mitigate its eects on th design and implementation of economic policies. Only then, countries could have durable economic policies that may engender higher economic growth.
Transcript of Political
Political Instability and Economic Growth
we find that political instability significantly reduces economic growth, both statistically and economically. But, we go beyond the current state of the literature by quantitatively determining the importance of the transmission channels of political instability to economic growth. To the best of our knowledge, there has been no attempt so far to systematically estimate the effect of political instability on each factor of production and TFP separately. This contribution goes a long way in advancing the literature, helping the profession understand the most important mechanisms through which political instability affects economic growth. . By identifying and quantitatively determining the main channels of transmission from political instability to economic growth, this paper contributes to a better understanding on how politics affects economic performance. More than half of the total negative effects of political instability on real GDP per capita growth seem to operate through its adverse effects on total factor productivity (TFP) growth,
democracy seems to positively affect human capital growth, as the Polity Scale is statistically significant, with a positive sign The purpose of this paper is to empirically determine the effects of political instability on economic growth. Using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of GDP per capita. Regarding the channels of transmission, we find that political instability adversely affects growth by lowering the rates of productivity growth and, to a smaller degree, physical and human capital accumulation. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a small negative effect. governments in politically fragmented countries with high degrees of political instability need to address its root causes and try to mitigate its effects on the design and implementation of economic policies. Only then, countries could have durable economic policies that may engender higher economic growth.
