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Crises And Government: Some Empirical Evidence

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  • Andrew T. Young
  • Jamie Bologna

Abstract

type="main" xml:id="coep12154-abs-0001"> We examine a panel of 70 countries during 1966–2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross-section regressions using 40-year (1970–2010) changes in government variables. In general, the estimated effects of crises on government size/scope are statistically insignificant. We report reasonably robust evidence that inflation and currency crises lead to decreases in the extent of government regulations throughout an economy over a 10-year horizon. Also, over the 40-year period, countries that spent more years in crisis are associated with weaker legal systems and property rights. The size and scope of government appear to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40-year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights. (JEL E02, O11, O43)

Suggested Citation

  • Andrew T. Young & Jamie Bologna, 2016. "Crises And Government: Some Empirical Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 34(2), pages 234-249, April.
    • Handle: RePEc:bla:coecpo:v:34:y:2016:i:2:p:234-249
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    File URL: http://hdl.handle.net/10.1111/coep.2016.34.issue-2
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    Cited by:

    1. Ryan H. Murphy, 2019. "The long‐run effect of government ideology on economic freedom," Economic Affairs, Wiley Blackwell, vol. 39(1), pages 101-114, February.
    2. Justin Callais & Andrew T. Young, 2021. "Does constitutional entrenchment matter for economic freedom?," Contemporary Economic Policy, Western Economic Association International, vol. 39(4), pages 808-830, October.
    3. Asim Iqbal & Aftab Anwar & Khalil Ahmad, 2023. "Institutional Development And Business Freedom: Insights From Developing Nations," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(2), pages 457-465.
    4. O'Reilly, Colin & Powell, Benjamin, 2015. "War and the growth of government," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 31-41.
    5. Kathleen M. Sheehan & Andrew T. Young, 2015. "It'S A Small World After All: Internet Access And Institutional Quality," Contemporary Economic Policy, Western Economic Association International, vol. 33(4), pages 649-667, October.
    6. Muriuki, James & Hudson, Darren & Fuad, Syed & March, Raymond J. & Lacombe, Donald J., 2023. "Spillover effect of violent conflicts on food insecurity in sub-Saharan Africa," Food Policy, Elsevier, vol. 115(C).
    7. Bjørnskov, Christian & Rode, Martin, 2016. "And Yet It Grows: Crisis, Ideology, and Interventionist Policy Ratchets," Working Paper Series 1135, Research Institute of Industrial Economics.
    8. repec:jpe:journl:1416 is not listed on IDEAS
    9. Saunoris, James W. & Payne, James E. & Sobel, Russell S., 2025. "Identifying the ‘deep roots’ of economic freedom with implications for policy and economic reform," Journal of Policy Modeling, Elsevier, vol. 47(1), pages 211-227.
    10. Justin Callais & Kerianne Lawson, 2024. "Underperforming reformers: Examining disappointing cases of economic reforms," Kyklos, Wiley Blackwell, vol. 77(3), pages 593-615, August.
    11. Tushar Bharati & Mohammad Farhad & Michael Jetter, 2023. "On the relationship between trade openness and government size," The World Economy, Wiley Blackwell, vol. 46(7), pages 2102-2133, July.
    12. Andersson, Fredrik NG, 2016. "A Blessing in Disguise? Banking Crises and Institutional Change," World Development, Elsevier, vol. 83(C), pages 135-147.
    13. Jamie Bologna & Joshua C. Hall, 2014. "Economic Freedom Research: Some Comments and Suggestions," Working Papers 14-23, Department of Economics, West Virginia University.
    14. Ryan H. Murphy & Taylor Leland Smith, 2018. "Aggregate demand shortfalls and economic freedom," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 111-122, March.
    15. Callais, Justin T. & Young, Andrew T., 2023. "A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 744-777.
    16. Sobel, Russell S., 2017. "The rise and decline of nations: the dynamic properties of institutional reform 1," Journal of Institutional Economics, Cambridge University Press, vol. 13(3), pages 549-574, September.
    17. Jamie Bologna Pavlik & Estefania Lujan Padilla & Benjamin Powell, 2019. "Cultural Baggage: Do Immigrants Import Corruption?," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1243-1261, April.
    18. Ryan H Murphy, 2020. "Does democracy die in recessions? A descriptive analysis of aggregate demand shortfalls and regime transition," Economic Affairs, Wiley Blackwell, vol. 40(1), pages 63-76, February.
    19. Powell, Benjamin & Clark, J.R. & Nowrasteh, Alex, 2017. "Does mass immigration destroy institutions? 1990s Israel as a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 83-95.
    20. Bjørnskov, Christian, 2016. "Economic freedom and economic crises," European Journal of Political Economy, Elsevier, vol. 45(S), pages 11-23.
    21. Keith Barnatchez & Robert Lester, 2017. "The Relationship Between Economic Freedom And Economic Dynamism," Contemporary Economic Policy, Western Economic Association International, vol. 35(2), pages 358-372, April.

    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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