Political Persistence, Connections and Economic Growth
AbstractUsing data on a panel of 56 democratic countries in the period 1975-2004, we find evidence of a negative association between political stability and economic growth which is stronger and empirically more robust in countries with high bureaucratic costs. Motivated by these results, which contrast with previous contributions, we develop a model of growth with quality improvements where political connections with long-term politicians can be exploited by low-quality producers to defend their monopoly position and prevent innovation and entry of high-quality competitors. This requires that the incumbent politician remains in office and that the red-tape cost advantage granted by political connections is large relative to the quality upgrade related to innovation. Consistently with our empirical findings, the model delivers a negative association between the probability that the incumbent politician remains in office and average economic growth in the presence of high bureaucratic costs.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.107.
Date of creation: Dec 2009
Date of revision:
Political Persistence; Growth; Innovation;
Other versions of this item:
- Giorgio Bellettini & Carlotta Berti Ceroni & Giovanni Prarolo, 2009. "Political Persistence, Connections and Economic Growth," CESifo Working Paper Series 2553, CESifo Group Munich.
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-DEV-2010-01-16 (Development)
- NEP-FDG-2010-01-16 (Financial Development & Growth)
- NEP-POL-2010-01-16 (Positive Political Economics)
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