How Does Political Instability Affect Economic Growth?

Ari Aisen and Francisco Veiga

No 2011/012, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; real GDP (search for similar items in EconPapers)
Pages: 28
Date: 2011-01-01
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Citations: View citations in EconPapers (41)

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Related works:
Journal Article: How does political instability affect economic growth? (2013)
Working Paper: How does political instability affect economic growth? (2010)
Working Paper: How does political instability affect economic growth? (2010)
Working Paper: How does political instability affect economic growth? (2010)
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