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Income growth, ethnic polarization, and political risk: Evidence from international oil price shocks

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  • Brückner, Markus
  • Gradstein, Mark

Abstract

This paper studies the effects of growth in countries’ national incomes on political risk. To address causality, we use the annual growth rate of the international oil price weighted with countries’ average oil net-export GDP shares as an instrument for national income growth. Our instrumental variables analysis yields two main results: (i) income growth has on average a significant negative effect on countries’ political risk; (ii) the marginal effect of income growth on political risk is significantly decreasing in cross-country differences in ethnic polarization, so much so that at high levels of ethnic polarization income growth increases political risk while at low levels of ethnic polarization income growth reduces political risk.

Suggested Citation

  • Brückner, Markus & Gradstein, Mark, 2015. "Income growth, ethnic polarization, and political risk: Evidence from international oil price shocks," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 575-594.
  • Handle: RePEc:eee:jcecon:v:43:y:2015:i:3:p:575-594 DOI: 10.1016/j.jce.2014.05.005
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    1. repec:eee:eneeco:v:66:y:2017:i:c:p:571-581 is not listed on IDEAS
    2. repec:eee:poleco:v:49:y:2017:i:c:p:47-70 is not listed on IDEAS
    3. Liu, Chang & Sun, Xiaolei & Chen, Jianming & Li, Jianping, 2016. "Statistical properties of country risk ratings under oil price volatility: Evidence from selected oil-exporting countries," Energy Policy, Elsevier, vol. 92(C), pages 234-245.
    4. Janus, Thorsten & Riera-Crichton, Daniel, 2015. "Economic shocks, civil war and ethnicity," Journal of Development Economics, Elsevier, vol. 115(C), pages 32-44.
    5. Farzanegan, Mohammad Reza & Witthuhn, Stefan, 2017. "Corruption and political stability: Does the youth bulge matter?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 47-70.

    More about this item

    Keywords

    Income growth; Political risk; Ethnic polarization;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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