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Is Elite Political Stability a Necessary Condition for Economic Growth? An Empirical Evidence from the Baltic States

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  • Ladislava Grochova

    () (Department of Economics, University of Economics Prague)

  • Ludek Kouba

    () (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)

Abstract

The growth theory of new political economy distinguishes two types of political instability - elite (violent coups, riots) and non-elite (non-violent government breakdowns). The purpose of the paper is to show that elite political stability is not a necessary condition for economic growth, i.e. we cast a doubt on a generality of growth theory when considering not exact term of political stability. Our hypothesis is tested on panel data from the Baltic states where a number of government changes has taken place and still fast economic growth can be seen over the last two decades. A dynamic ordinary least square (DOLS) model is used to estimate production function augmented with an elite political instability variable. Since it is shown that elite political instability has a negligible impact on economic growth, we consider the hypothesis regarding the necessity of political stability for economic development to be only a specific non-generalizable case, emphasizing the necessity of distinguishing elite and non-elite political instability.

Suggested Citation

  • Ladislava Grochova & Ludek Kouba, 2011. "Is Elite Political Stability a Necessary Condition for Economic Growth? An Empirical Evidence from the Baltic States," MENDELU Working Papers in Business and Economics 2011-15, Mendel University in Brno, Faculty of Business and Economics.
  • Handle: RePEc:men:wpaper:15_2011
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    Cited by:

    1. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    2. Ladislava Grochova & Ludek Kouba, 2010. "Elite Political Instability and Economic Growth: An Empirical Evidence from the Baltic States," MENDELU Working Papers in Business and Economics 2010-01, Mendel University in Brno, Faculty of Business and Economics.
    3. Petr Rozmahel & Ludek Kouba & Ladislava Grochová & Nikola Najman, 2013. "Integration of Central and Eastern European Countries: Increasing EU Heterogeneity?," WWWforEurope Working Papers series 9, WWWforEurope.

    More about this item

    Keywords

    new political economy; political instability; elite political instability; production function; single equation; Baltic states;

    JEL classification:

    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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