IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v34y2026is2p263-279.html

Political Stability and Economic Development: Institutional Sclerosis and the Moderating Role of Institutions

Author

Listed:
  • Yu Ri Kim
  • Woojin Kim
  • Yunseo Roh
  • Taewoo Roh

Abstract

This study investigates the non‐linear effects of political stability on economic development and explores the moderating role of institutional factors. Drawing on panel data from 162 countries between 2007 and 2022, we employ a system generalised method of moments (system‐GMM) estimator to test the hypothesis that political stability follows an inverted U‐shaped relationship with economic growth. Our findings provide robust support for the institutional sclerosis hypothesis, which refers to the tendency of entrenched interest groups in overly stable political systems to resist reform and innovation. While moderate stability fosters growth, excessive stability leads to diminished returns, institutional rigidity, and reform inertia. Importantly, among the institutional moderators considered—economic freedom, government quality, and human capital—only education, as a proxy for cognitive capacity, significantly attenuates the negative impact of over‐stabilisation. This suggests that educational capital functions not merely as a productivity input, but as a cognitive institutional force that enhances societal adaptability and resilience. These findings challenge the conventional wisdom that political stability uniformly promotes development and instead emphasise the contingent nature of stability's effects. From a policy perspective, the study underscores the need for institutional flexibility and strategic investment in education to counteract the stagnating effects of political over‐stabilisation, particularly in developing economies. JEL Classification: O10; O43; C23

Suggested Citation

  • Yu Ri Kim & Woojin Kim & Yunseo Roh & Taewoo Roh, 2026. "Political Stability and Economic Development: Institutional Sclerosis and the Moderating Role of Institutions," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(S2), pages 263-279, March.
    • Handle: RePEc:wly:sustdv:v:34:y:2026:i:s2:p:263-279
    DOI: 10.1002/sd.70340
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.70340
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.70340?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    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:wly:sustdv:v:34:y:2026:i:s2:p:263-279. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.