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The Impact of Capital Market Players’ Exit, Voice and Loyalty on Economic Growth

  • Zsolt Szabó

    (Hungarian Development Bank)

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    In analyses of the global money and capital markets, economic discourse is mostly focussed on the movement and flow of capital, giving less emphasis to its role in influencing the formation of institutional frameworks as well as national and international rules, particularly in terms of the impact on economic growth. Based on the concept of exit, voice and loyalty developed by Albert O. Hirschman, this paper examines the effect of capital movement and investors’ voice on economic growth, making use of both macroeconomic tools and linear regression based on the data of European countries and Post-Soviet states. Our results indicate that the de facto exit of capital has a negative effect on economic growth, while the de jure exit of capital to the shadow economy and investors’ voice result in a higher growth rate.

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    File URL: http://www.asz.hu/public-finance-quarterly-articles/2012/the-impact-of-capital-market-players-exit-voice-and-loyalty-on-economic-growth/a-474-489-szabo-a-javitott-vn.pdf
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    Article provided by State Audit Office of Hungary in its journal Public Finance Quarterly.

    Volume (Year): 57 (2012)
    Issue (Month): 4 ()
    Pages: 474-489

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    Handle: RePEc:pfq:journl:v:57:y:2012:i:4:p:474-489
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    1. James H. Anderson & Georges Korsun & Peter Murrell, 1999. "Ownership, exit and voice after mass privatization," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 215-243, March.
    2. Bolton, P. & von Thadden, E.L., 1996. "Blocks, liquidity and corporate control," Discussion Paper 1996-80, Tilburg University, Center for Economic Research.
    3. Bhagwati, Jagdish N. & Brecher, Richard A. & Dinopoulos, Elias & Srinivasan, T. N., 1987. "Quid pro quo foreign investment and welfare : A political-economy-theoretic model," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 127-138, October.
    4. Frydman, Roman & Pistor, Katharina & Rapaczynski, Andrzej, 1996. "Exit and voice after mass privatization: The case of Russia," European Economic Review, Elsevier, vol. 40(3-5), pages 581-588, April.
    5. Dailami, Mansoor, 1999. "Managing risks of capital mobility," Policy Research Working Paper Series 2199, The World Bank.
    6. Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 579-594, July.
    7. Williamson, Oliver E, 1976. "The Economics of Internal Organization: Exit and Voice in Relation to Markets and Hierarchies," American Economic Review, American Economic Association, vol. 66(2), pages 369-77, May.
    8. Michael J. Hiscox, 2004. "International Capital Mobility And Trade Politics: Capital Flows, Political Coalitions, And Lobbying," Economics and Politics, Wiley Blackwell, vol. 16, pages 253-285, November.
    9. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
    10. Adam, M. C. & Ginsburgh, V., 1985. "The effects of irregular markets on macroeconomic policy : Some estimates for belgium," European Economic Review, Elsevier, vol. 29(1), pages 15-33.
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