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Political Persistence, Connections and Economic Growth

Author

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  • Giorgio Bellettini
  • Carlotta Berti Ceroni
  • Giovanni Prarolo

Abstract

Using data on a panel of 56 democratic countries in the period 1975-2004, we find evidence of a negative association between political stability and economic growth which is stronger and empirically more robust in countries with high bureaucratic costs. Motivated by these results, which contrast with previous contributions, we develop a model of growth with quality improvements where political connections with long-term politicians can be exploited by low-quality producers to defend their monopoly position and prevent innovation and entry of high-quality competitors. This requires that the incumbent politician remains in office and that the red-tape cost advantage granted by political connections is large relative to the quality upgrade related to innovation. Consistently with our empirical findings, the model delivers a negative association between the probability that the incumbent politician remains in office and average economic growth in the presence of high bureaucratic costs.

Suggested Citation

  • Giorgio Bellettini & Carlotta Berti Ceroni & Giovanni Prarolo, 2009. "Political Persistence, Connections and Economic Growth," CESifo Working Paper Series 2553, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2553
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    References listed on IDEAS

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    1. repec:cem:jaecon:v:20:y:2017:n:1:p:141-168 is not listed on IDEAS
    2. Lee, Chien-Chiang & Lin, Chun-Wei & Zeng, Jhih-Hong, 2016. "Financial liberalization, insurance market, and the likelihood of financial crises," Journal of International Money and Finance, Elsevier, vol. 62(C), pages 25-51.
    3. Atella, Vincenzo & Carbonari, Lorenzo, 2012. "When elders rule: is gerontocracy harmful for growth?," MPRA Paper 36574, University Library of Munich, Germany.
    4. Vincenzo Atella & Lorenzo Carbonari, 2017. "Is gerontocracy harmful for growth? A comparative study of seven European countries," Journal of Applied Economics, Universidad del CEMA, vol. 20, pages 141-168, May.

    More about this item

    Keywords

    political persistence; growth; innovation;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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