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Effective information, political structure and economic growth

Mary Merva, Adrian Stoian and Simona Costagli

Economics of Transition and Institutional Change, 2021, vol. 29, issue 4, 597-620

Abstract: Digital transformation of information led us to reconsider Hayek’s (American Economic Review, 35, 519–530) insight on a fuller use of information and re‐classify political structures based on their information protection policies. This allows us to link the accumulation of information with the political structure to frame their joint impact on economic growth. We develop a model of ‘effective information’ beginning with information production and absorption and then allowing for its political propagation based on the degree of information protection. Using data from 40 countries, we find: (i) effective information and its spillovers contribute to an increase in productivity; and (ii) reductions in information protection bring larger increases in effective information as economies near an ‘information‐technology frontier’ contributing to economic growth divergence.

Date: 2021
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Handle: RePEc:wly:ectrin:v:29:y:2021:i:4:p:597-620