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Institutions and Growth Volatility

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  • Nejat Anbarci

    ()
    (Department of Economics, Florida International University)

  • Jonathan Hill

    ()
    (Department of Economics, Florida International University)

  • Hasan Kirmanoglu

    ()
    (Department of Economics, Bilkin University)

Abstract

Growth volatility is a major factor that retards growth. Recent studies that link democracy and volatility can not account for a link between democracy and investment volatility. Here, instead, we focus on a specific channel that links individualistism and low volatility. Unlike an individualistic society, in a collectivistic society agents choose to invest together or choose not to invest together. We construct a two-equation system of investment and income growth volatility. We find individualism significantly directly and indirectly influences volatility negatively. We also find that, unlike individualism, democracy’s influence on investment depends on the measure of democracy and econometric specification used.

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File URL: http://casgroup.fiu.edu/pages/docs/2247/1275232387_05-08.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0508.

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Length: 33 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:fiu:wpaper:0508

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Keywords: Growth volatility; investment volatility; democracy; individualism/collectivism;

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References

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Cited by:
  1. Marc Sangnier, 2009. "Does trust favor macroeconomic stability?," PSE Working Papers halshs-00575021, HAL.
  2. Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.
  3. repec:hal:wpaper:halshs-00575021 is not listed on IDEAS
  4. Vatcharin Sirimaneetham, 2006. "Explaining policy volatility in developing countries," Bristol Economics Discussion Papers 06/583, Department of Economics, University of Bristol, UK.

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