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Institutions and Growth Volatility

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Author Info
Nejat Anbarci () (Department of Economics, Florida International University)
Jonathan Hill () (Department of Economics, Florida International University)
Hasan Kirmanoglu () (Department of Economics, Bilkin University)

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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://www.fiu.edu/orgs/economics/wp2005/05-08.pdf
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File Function: First version, 2005
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Publisher 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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Related research
Keywords: Growth volatility; investment volatility; democracy; individualism/collectivism;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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  15. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September. [Downloadable!] (restricted)
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  16. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Vatcharin Sirimaneetham, 2006. "Explaining policy volatility in developing countries," Bristol Economics Discussion Papers 06/583, Department of Economics, University of Bristol, UK. [Downloadable!]
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