Elite Political Instability and Economic Growth: An Empirical Evidence from the Baltic States
AbstractThe growth theory of new political economics defines some factors that are necessary for economic growth among which political stability. There are distinguished two types of political instability - elite and non-elite - in topical literature. While non-elite political instability concerns about violent coups, riots or civil wars, elite political instability is represented with "soft changes" such as government breakdowns, fragile majority or minority governments. We don't doubt the importance of general political stability for successful economic development. Nevertheless, we don Ìt agree that elite political instability can be understood as an insuperable obstacle for it. The aim of the paper is to disprove the hypothesis that elite political stability is a necessary condition for economic growth. Equally with other papers, a number of government changes is used as a proxy of elite political instability. The disproof of the hypothesis is demonstrated on data from the Baltic states where a number of government changes takes place and still fast economic growth could be seen within last two decades. The model has a form of augmented production function and includes growth rates of investments, exports, and labour as independent variables and government changes as an elite political instability dummy variable. The data resulting from estimations applying GMM and GLS because of endogeneity and autocorrelation problems are statistically significant for all three countries and confirm our hypothesis that elite political stability is a necessary condition for economic growth.
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Bibliographic InfoPaper provided by Mendel University in Brno, Faculty of Business and Economics in its series MENDELU Working Papers in Business and Economics with number 2010-01.
Date of creation: Feb 2010
Date of revision:
new political economics; political instability; elite political instability; production function; single equation; Baltic states;
Find related papers by JEL classification:
- B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
- P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-11 (All new papers)
- NEP-FDG-2011-06-11 (Financial Development & Growth)
- NEP-POL-2011-06-11 (Positive Political Economics)
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.:
- Gyimah-Brempong, Kwabena & Traynor, Thomas L, 1999. "Political Instability, Investment and Economic Growth in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 52-86, March.
- Jong-A-Pin, Richard, 2009.
"On the measurement of political instability and its impact on economic growth,"
European Journal of Political Economy,
Elsevier, vol. 25(1), pages 15-29, March.
- Jong-A-Pin, R., 2006. "On the measurement of political instability and its impact on economic growth," Research Report 06C05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Ladislava Grochova & Ludek Kouba, 2011. "Is Elite Political Stability a Necessary Condition for Economic Growth? An Empirical Evidence from the Baltic States," MENDELU Working Papers in Business and Economics 2011-15, Mendel University in Brno, Faculty of Business and Economics.
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