Is Elite Political Stability a Necessary Condition for Economic Growth? An Empirical Evidence from the Baltic States

Ladislava Issever Grochová and Luděk Kouba

No 2011-15, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: The growth theory of new political economy distinguishes two types of political instability - elite (violent coups, riots) and non-elite (non-violent government breakdowns). The purpose of the paper is to show that elite political stability is not a necessary condition for economic growth, i.e. we cast a doubt on a generality of growth theory when considering not exact term of political stability. Our hypothesis is tested on panel data from the Baltic states where a number of government changes has taken place and still fast economic growth can be seen over the last two decades. A dynamic ordinary least square (DOLS) model is used to estimate production function augmented with an elite political instability variable. Since it is shown that elite political instability has a negligible impact on economic growth, we consider the hypothesis regarding the necessity of political stability for economic development to be only a specific non-generalizable case, emphasizing the necessity of distinguishing elite and non-elite political instability.

Keywords: new political economy; political instability; elite political instability; production function; single equation; Baltic states (search for similar items in EconPapers)
JEL-codes: B59 C20 O52 P26 (search for similar items in EconPapers)
Pages: 17
Date: 2011-11
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 (2)

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Related works:
Working Paper: Elite Political Instability and Economic Growth: An Empirical Evidence from the Baltic States (2010)
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