Political Institutions and Output Collapses
Patrick Imam and
No 2023/036, IMF Working Papers from International Monetary Fund
Major output collapses are costly and frequent in the developing world. Using cross-country data, we classify five-year periods using a two-dimensional state space based on growth regimes and political institutions. We then model the joint evolution of output growth and political institutions as a finite state Markov chain, and study how countries move between states. We find that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.
Keywords: Economic growth; autocracy; democracy (search for similar items in EconPapers)
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