On the economic costs of political instabilities: a tale of sub-Saharan Africa

Joe Maganga Zonda, Chang-Ching Lin and Ming-Jen Chang ()
Additional contact information
Joe Maganga Zonda: National Dong Hwa University
Chang-Ching Lin: National Cheng Kung University
Ming-Jen Chang: National Dong Hwa University

Empirical Economics, 2024, vol. 66, issue 1, No 5, 137-173

Abstract: Abstract The relationship between political instability (PI) and economic development has been extensively debated in the social sciences, yielding contrasting empirical results. In this article, we synergise two novel techniques—synthetic control (SC) and matrix completion (MC)—to study the economic effects of PI events on the sub-Saharan African scene. Our identification strategies capture potential spatial and temporal heterogeneities of treatment effects. We show that PI inflicts statistically and economically significant collateral damage, albeit heterogeneous across economies and over time. Notably, the group average treatment effect on the treated (ATT) reveals output shrinkage of approximately 17–20 percentage points. Exploiting the temporal dimension of the two techniques, we find that although output loss persists into the long run, the bulk of the damage is wrecked in the short run. This finding particularly casts doubt on the full economic recovery hypothesis in the near aftermath of a PI episode. Furthermore, we unearth spatial heterogeneities of the effects where we show that the negative effects are disproportionately more pronounced for economies which experience protracted PI episodes. Lastly, our paper demonstrates that while both methods provide reliable counterfactuals, the MC estimator yields significantly better pre-treatment fit in our data than the SC framework.

Keywords: Political instability; Economic recovery; Economic growth; Sub-Saharan Africa; Matrix completion; Synthetic control (search for similar items in EconPapers)
JEL-codes: C21 D74 P16 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00181-023-02452-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:66:y:2024:i:1:d:10.1007_s00181-023-02452-4

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-023-02452-4

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().