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

  • Ladislava Grochova


    (Department of Economics, University of Economics Prague)

  • Ludek Kouba


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

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.

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Paper provided by Mendel University in Brno, Faculty of Business and Economics in its series MENDELU Working Papers in Business and Economics with number 2011-15.

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Length: 17
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:men:wpaper:15_2011
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