IDEAS home Printed from https://ideas.repec.org/a/rmk/rmkjrc/v2y2015i1p1-18.html
   My bibliography  Save this article

Democracy, Political Stability and Economic performance. A Panel Data Analysis

Author

Listed:
  • Militiades N. Georgiou
  • Nicholas Kyriazis
  • Emmanouil M. L. Economou

Abstract

In the present paper we undertake to link political stability under democracy with a set of indicators for economic freedom and financial crises, using panel data analysis. The sample covers annually the period 2000-2012 for selected European Union (EU) member-states, USA and Japan. The results support our main thesis, that political stability in democratic regimes is positively related to the set of economic freedom indicators and negatively to financial crises, because greater economic freedom influences positively investment and economic growth, while financial crises, which lead to austerity policies, which again lead to recession-depression, increase dissatisfaction among citizens with the workings of democracy and thus, to the rise of extremist parties. Our findings support the idea that political stability in democratic regimes is linked to economic stability and growth and vice-versa.

Suggested Citation

  • Militiades N. Georgiou & Nicholas Kyriazis & Emmanouil M. L. Economou, 2015. "Democracy, Political Stability and Economic performance. A Panel Data Analysis," Journal of Risk & Control, Risk Market Journals, vol. 2(1), pages 1-18.
    • Handle: RePEc:rmk:rmkjrc:v:2:y:2015:i:1:p:1-18
    as

    Download full text from publisher

    File URL: https://www.riskmarket.co.uk/jrc/journals-articles/issues/democracy-political-stability-and-economic-performance-a-panel-data-analysis/?download=attachment.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    2. Halkos, George E., 2003. "Environmental Kuznets Curve for sulfur: evidence using GMM estimation and random coefficient panel data models," Environment and Development Economics, Cambridge University Press, vol. 8(4), pages 581-601, October.
    3. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    4. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    5. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    6. Emmanouil Economou & Nicholas Kyriazis & Theodore Metaxas, 2015. "The institutional and economic foundations of regional proto-federations," Economics of Governance, Springer, vol. 16(3), pages 251-271, August.
    7. repec:hrv:faseco:30728041 is not listed on IDEAS
    8. MacCulloch, Robert, 2005. "Income Inequality and the Taste for Revolution," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 93-123, April.
    9. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
    10. Mutascu, Mihai & Tiwari, Aviral & Estrada, Fernando, 2011. "Taxation and political stability," MPRA Paper 36855, University Library of Munich, Germany, revised Feb 2012.
    11. John H. Munro, 2007. "Tawney's Century (1540-1640): the Roots of Modern Capitalist Entrepreneurship in England," Working Papers tecipa-295, University of Toronto, Department of Economics.
    12. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    13. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    14. Nicholas Kyriazis, 2009. "Financing the Athenian state: public choice in the age of Demosthenes," European Journal of Law and Economics, Springer, vol. 27(2), pages 109-127, April.
    15. Malhotra, Neil & Carnes, Matthew E., 2008. "Political Stability Under Uncertainty: Applying Bounded Rationality to the Study of Governance and Civil Conflict," British Journal of Political Science, Cambridge University Press, vol. 38(1), pages 45-64, January.
    16. Davis, Peter, 2002. "Estimating multi-way error components models with unbalanced data structures," Journal of Econometrics, Elsevier, vol. 106(1), pages 67-95, January.
    17. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    18. de Vries,Jan & van der Woude,Ad, 1997. "The First Modern Economy," Cambridge Books, Cambridge University Press, number 9780521570619, December.
    19. Joshua C. Hall & Robert A. Lawson, 2014. "Economic Freedom Of The World: An Accounting Of The Literature," Contemporary Economic Policy, Western Economic Association International, vol. 32(1), pages 1-19, January.
    20. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    21. S. Brock Blomberg & Gregory D. Hess, 2002. "The Temporal Links between Conflict and Economic Activity," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 74-90, February.
    22. Weingast, Barry R., 1997. "The Political Foundations of Democracy and the Rule of the Law," American Political Science Review, Cambridge University Press, vol. 91(2), pages 245-263, June.
    23. de Vries,Jan & van der Woude,Ad, 1997. "The First Modern Economy," Cambridge Books, Cambridge University Press, number 9780521578257, December.
    24. 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.
    25. Furubotn, Eirik G & Pejovich, Svetozar, 1972. "Property Rights and Economic Theory: A Survey of Recent Literature," Journal of Economic Literature, American Economic Association, vol. 10(4), pages 1137-1162, December.
    26. Carlos, Ann M., 2003. "The Rise of Commercial Empires: England and the Netherlands in the Age of Mercantilism, 1650–1770. By David Ormond. Cambridge: Cambridge University Press, 2003. Pp. ix, 388. $75.00," The Journal of Economic History, Cambridge University Press, vol. 63(4), pages 1154-1155, December.
    27. Gauci, Perry, 2001. "The Politics of Trade: The Overseas Merchant in State and Society, 1660-1720," OUP Catalogue, Oxford University Press, number 9780199241934.
    28. Nicholas Kyriazis & Theodore Metaxas, 2011. "Path dependence, change and the emergence of the first joint-stock companies," Business History, Taylor & Francis Journals, vol. 53(3), pages 363-374.
    29. Evangelos Vasileiou, 2014. "Political Stability and Fianancial Crisis: What the data say for the European Union’s countries," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 3(1), pages 143-169, January.
    30. Lyttkens Carl Hampus, 1994. "A Predatory Democracy? An Essay on Taxation in Classical Athens," Explorations in Economic History, Elsevier, vol. 31(1), pages 62-90, January.
    31. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, December.
    32. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    33. Vivian Lei & Steven Tucker & Filip Vesely, 2010. "Forgive or buy back: an experimental study of debt relief," Review of Economic Design, Springer;Society for Economic Design, vol. 14(3), pages 291-309, September.
    34. Azam Chaudhry & Phillip Garner, 2006. "Political Competition Between Countries and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 666-682, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ioannis Gasteratos & Michael Karamalis & Andreas Koutoupis, 2016. "Shadow Economy Worsens Income distribution," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 80-92.

    More about this item

    Keywords

    democracy; economic freedom; financial crisis; panel data analysis.;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rmk:rmkjrc:v:2:y:2015:i:1:p:1-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eleftherios Spyromitros-Xioufis). General contact details of provider: http://www.riskmarket.co.uk/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.