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Economic development as a matter of political geography

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  • Jorge M.Streb
  • Pablo F.Druck

    ()

Abstract

Can limited government be a driving force of economic development? This idea goes back to Montesquieu, and is closely related to recent research in institutional economics. Measuring limited government with the Henisz political constraints index, and economic development with income per capita, the paper first does a causality test to see whether political constraints lead income per capita. Since both are persistent variables, their differences are analyzed. The evidence from the 1960-1990 period indeed suggests that increases in political constraints precede economic growth. The effect of political constraints might take a long time period to set in, so a second test looks at the link between income per capita and polity persistence, conditioned on the degree of political constraints. Polity persistence is positively linked to income per capita with high political constraints, but there is no link with low political constraints. This broader evidence suggests that limited government has been condu

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Bibliographic Info

Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 34 (2007)
Issue (Month): 1 Year 2007 (June)
Pages: 5-20

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Handle: RePEc:udc:esteco:v:34:y:2007:i:1:p:5-20

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Web page: http://www.econ.uchile.cl/
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Keywords: Limited government; political constraints; polity persistence; economic development; income per capita.;

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References

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  1. Sylos Labini,Paolo, 2001. "Underdevelopment," Cambridge Books, Cambridge University Press, number 9780521588690.
  2. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," MPRA Paper 25720, University Library of Munich, Germany.
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  5. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
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  7. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
  8. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  9. Clague, Christopher, et al, 1996. " Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-76, June.
  10. Jorge M.Streb, 2001. "Political uncertainty and economic underdevelopment," Estudios de Economia, University of Chile, Department of Economics, vol. 28(1 Year 20), pages 89-114, June.
  11. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
  12. Stephen D. Williamson, 1984. "Costly Monitoring, Loan Contracts and Equilibrium Credit Rationing," Working Papers 572, Queen's University, Department of Economics.
  13. Jorge C. Ávila, 1998. "El Potencial Argentino de Crecimiento," CEMA Working Papers: Serie Documentos de Trabajo. 132, Universidad del CEMA.
  14. Pablo Druck & Pietro Garibaldi, 2000. "Inflation Risk and Portfolio Allocation in the Banking System," CEMA Working Papers: Serie Documentos de Trabajo. 181, Universidad del CEMA.
  15. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," World Bank Research Observer, World Bank Group, vol. 15(1), pages 99-135, February.
  16. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
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Cited by:
  1. Jorge M.Streb, 2001. "Political uncertainty and economic underdevelopment," Estudios de Economia, University of Chile, Department of Economics, vol. 28(1 Year 20), pages 89-114, June.
  2. Jorge Streb, 2010. "Hume: The power of abduction and simple observation in economics," CEMA Working Papers: Serie Documentos de Trabajo. 417, Universidad del CEMA.

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