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Long‐term vision and economic development

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  • Oasis Kodila‐Tedika
  • Sherif Khalifa

Abstract

This paper examines the effect on economic development of whether a country's policymakers adopt a long‐term vision. We use a novel institutional variable that indicates whether policymakers have a long‐term strategic vision. However, the difficulty in estimating a causal effect is that long‐term vision is endogenous to economic development. Therefore, we use the future‐time reference language variables introduced in American Economic Review, 103, 690; 2013 as instrumental variables for long‐term vision. To account for endogeneity, the paper conducts two‐stage least‐squares estimations where the language instruments are used in the first stage to find an exogenous source of variation in long‐term vision. The results show that long‐term vision, instrumented by future‐time reference, explains cross‐country variations in economic development. These results are robust even after the inclusion of control variables and after the exclusion of outliers.

Suggested Citation

  • Oasis Kodila‐Tedika & Sherif Khalifa, 2020. "Long‐term vision and economic development," The World Economy, Wiley Blackwell, vol. 43(11), pages 3088-3102, November.
  • Handle: RePEc:bla:worlde:v:43:y:2020:i:11:p:3088-3102
    DOI: 10.1111/twec.12982
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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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