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Do government formation deadlocks damage economic growth? Evidence from history’s longest period of political deadlock

Daniel Albalate () and Germà Bel ()
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Daniel Albalate: Department of Econometrics, Statistics and Applied Economics & GiMIREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131
Germà Bel: Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573

No 201817, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Several countries have experienced lengthy periods of political deadlock in recent years, as they have sought to form a new government. This study examines whether government formation deadlocks damagea country’s economy. To do so, we analyze the case of Belgium, which took a record 541 days to create a post-election government, following the June 2010 federal elections. Employing the synthetic control method, our results show that the Belgian economy did not suffer an economic toll; on the contrary, GDP per capita growth was higher than would have otherwise been expected. As such, our evidence contradicts frequent claims that long periods of government formation deadlock negatively affect an economy.

Keywords: Government; Political economy; Synthetic Control Method; Belgium. JEL classification:D72; E02; E65; H1; O43; P48; P52. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his
Date: 2018-07, Revised 2018-07
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