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Sociopolitical Instability and Long Run Economic Growth: a Cross Country Empirical Investigation

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  • James L.Butkiewicz

    ()
    (Department of Economics,University of Delaware)

  • Halit Yanikkaya

    ()
    (Department of Economics, Celal Bayar University)

Abstract

This paper investigates the effects of sociopolitical instability on long-run growth. The impacts of socio-political instability are estimated by cross-country growth regressions for a panel of nations over a thirty-year sample period. Overall, our results are consistent with the existing literature implying that, at best, a weak relationship exists between sociopolitical instability and growth. More importantly, this relationship depends crucially on the measure of sociopolitical instability used. Specifically, while government instability and social instability measures typically have weak and, in some instances, a positive, relationship with growth, political violence indicators have a negative and significant impact on growth. Furthermore, our results indicate that sociopolitical instability has larger adverse effects on countries with higher levels of development and democracy. Although the issue of potential reverse causality is widely emphasized in the literature, our IV estimation results imply that simultaneity is not a severe problem for estimates of empirical growth models including sociopolitical instability measures. On the contrary, the effects of outlier countries and, to a lesser degree, parameter heterogeneity are much more serious problems for estimates using these variables. Length pages: 30 pages

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Bibliographic Info

Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 04-04.

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Date of creation: 2004
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Publication status: Published in Journal of Policy Modeling, Vol. 27, 2005, pp. 629-645
Handle: RePEc:dlw:wpaper:04-04

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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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Keywords: Socio-political Instability; Political Violence; Growth;

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  1. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  2. Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
  3. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  4. Easterly, William, 1999. " Life during Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 239-76, September.
  5. Alberto Alesina & Guido Tabellini, 1988. "Voting on the Budget Deficit," NBER Working Papers 2759, National Bureau of Economic Research, Inc.
  6. Dollar, David & Svensson, Jakob, 1998. "What explains the success or failure of structural adjustment programs?," Policy Research Working Paper Series 1938, The World Bank.
  7. Sebastian Edwards & Guido Tabellini, 1991. "Political Instability, Political Weakness and Inflation: An Empirical Analysis," NBER Working Papers 3721, National Bureau of Economic Research, Inc.
  8. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  9. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  10. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  11. Brunetti, Aymo, 1997. " Political Variables in Cross-Country Growth Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 11(2), pages 163-90, June.
  12. Nuxoll, Daniel A, 1994. "Differences in Relative Prices and International Differences in Growth Rates," American Economic Review, American Economic Association, vol. 84(5), pages 1423-36, December.
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