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Institutions and Growth Volatility

  • Nejat Anbarci

    ()

    (Department of Economics, Florida International University)

  • Jonathan Hill

    ()

    (Department of Economics, Florida International University)

  • Hasan Kirmanoglu

    ()

    (Department of Economics, Bilkin University)

Growth volatility is a major factor that retards growth. Recent studies that link democracy and volatility can not account for a link between democracy and investment volatility. Here, instead, we focus on a specific channel that links individualistism and low volatility. Unlike an individualistic society, in a collectivistic society agents choose to invest together or choose not to invest together. We construct a two-equation system of investment and income growth volatility. We find individualism significantly directly and indirectly influences volatility negatively. We also find that, unlike individualism, democracy’s influence on investment depends on the measure of democracy and econometric specification used.

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File URL: http://casgroup.fiu.edu/pages/docs/2247/1275232387_05-08.pdf
File Function: First version, 2005
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0508.

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Length: 33 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:fiu:wpaper:0508
Contact details of provider: Postal: Miami, FL 33199
Phone: (305) 348-2316
Fax: (305) 348-1524
Web page: http://casgroup.fiu.edu/Economics/

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