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Political Transition, Economic Growth and Reoccurring Crisis in Countries with and without Experience of Military Dictatorship

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  • Hakobyan, Lilit

    () (Department of Economics, Umeå School of Business and Economics)

Abstract

This paper analyses the experience of 83 countries from the period of 1950-2004 and addresses the following question: when do democratic transitions produce (good) bad economic outcomes. Following the theoretical papers of Acemoglu et al. (2004, 2008(a)), an attempt is made to control for both de jure and de facto sides of political power. In addition, the countries with and without the experience of Military Dictatorship (MD) are analysed separately. The results imply that concentration of economic power per se produces bad economic outcomes. Besides, the data seem to contain an indication that democratisation induces additional socially wasteful investments into de facto political power. In addition, the analyses suggest that, when the army assumes political leadership, countries with low concentration of economic power demonstrate better economic performance. In terms of Acemoglu et al. (2007), this may support the idea that the institutional environment switches from a “weak” to a “strong” one. Finally, the potential trade-off between democratisation and political stability seems to be mainly relevant to the degree of severity of reoccurring economic crises in countries with MD experience.

Suggested Citation

  • Hakobyan, Lilit, 2014. "Political Transition, Economic Growth and Reoccurring Crisis in Countries with and without Experience of Military Dictatorship," Umeå Economic Studies 871, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0871
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    Keywords

    de facto and de jure political power; economic growth; structural breaks; Markov-switching chain; military dictatorship; political transition;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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