How does political instability affect economic growth?

Ari Aisen and Francisco Veiga

No 5/2010, NIPE Working Papers from NIPE - Universidade do Minho

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: Economic growth; political instability; growth accounting; productivity (search for similar items in EconPapers)
JEL-codes: O43 O47 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-fdg and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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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? (2011)
Working Paper: How does political instability affect economic growth? (2010)
Working Paper: How does political instability affect economic growth? (2010)
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