Political Persistence, Connections and Economic Growth
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.
|Date of creation:||Dec 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Corso Magenta, 63 - 20123 Milan|
Web page: http://www.feem.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Massimiliano Landi & Antonio Merlo & Vincenzo Galasso & Andrea Mattozzi, 2008.
"The Labor Market of Italian Politicians,"
Labor Economics Working Papers
22461, East Asian Bureau of Economic Research.
- Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Working Papers 15-2008, Singapore Management University, School of Economics, revised Oct 2008.
- Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Carlo Alberto Notebooks 89, Collegio Carlo Alberto.
- Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
- Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
- Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992.
"Political Instability and Economic Growth,"
NBER Working Papers
4173, National Bureau of Economic Research, Inc.
- Kiviet, Jan F., 1995.
"On bias, inconsistency, and efficiency of various estimators in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, . "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996.
"Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics,"
Journal of Economic Growth,
Springer, vol. 1(3), pages 363-89, September.
- Francesco Caselli & Gerardo Esquivel & Fernando Lefort, 1997. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Working Papers Central Bank of Chile 03, Central Bank of Chile.
- Bruno, Giovanni S.F., 2005.
"Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models,"
Elsevier, vol. 87(3), pages 361-366, June.
- Giovanni S.F. Bruno, 2004. "Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models," KITeS Working Papers 159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
- Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
- Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
- MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
- Matland, Richard E. & Studlar, Donley T., 2004. "Determinants of Legislative Turnover: A Cross-National Analysis," British Journal of Political Science, Cambridge University Press, vol. 34(01), pages 87-108, January.
- Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
- Feng, Yi, 1997. "Democracy, Political Stability and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 27(03), pages 391-418, July.
- Giovanni S.F. Bruno, 2005.
"Estimation and inference in dynamic unbalanced panel data models with a small number of individuals,"
KITeS Working Papers
165, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jun 2005.
- Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
- Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
- Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the United States," CEP Discussion Papers dp1009, Centre for Economic Performance, LSE.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2009.107. 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: (barbara racah)
If references are entirely missing, you can add them using this form.