IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/36063.html
   My bibliography  Save this paper

The constitution of economic growth: Testing the prosperity effects of a Madisonian model on a panel of countries 1980‐2000

Author

Listed:
  • Justesen, Mogens K.
  • Kurrild-Klitgaard, Peter

Abstract

Political scientists and economists increasingly agree that institutions may influence economic growth, but there is little general agreement on what institutions tend to produce what consequences. We apply public choice insights for a theoretical analysis that may be termed “Madisonian”: Institutions that divide political power between multiple veto players and institutions that protect private property rights may be expected to have positive effects on economic growth. We analyze data from a panel of countries for the period 1980‐2000 in order to study the relationships, including a series of “extreme bounds” analyses in order to test the robustness of the statistical results. We find that particularly the presence of secure private property has a significant, positive and robust effect on economic growth and that when outliers are excluded a configuration where political power is dispersed among more veto players has a similar effect.

Suggested Citation

  • Justesen, Mogens K. & Kurrild-Klitgaard, Peter, 2007. "The constitution of economic growth: Testing the prosperity effects of a Madisonian model on a panel of countries 1980‐2000," MPRA Paper 36063, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36063
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/36063/1/MPRA_paper_36063.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    2. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    3. Ostrom, Elinor, 2009. "An Agenda for the Study of Institutions," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 89-110, December.
    4. Peter Kurrild-Klitgaard, 2004. "Ulysses and the Rent-Seekers: The Benefits and Challenges of Constitutional Constraints on Leviathan," Advances in Austrian Economics, in: The Dynamics of Intervention: Regulation and Redistribution in the Mixed Economy, pages 245-278, Emerald Group Publishing Limited.
    5. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    6. David Stasavage, 2000. "Private Investment and Political Uncertainty," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 25, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753.
    8. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521793797.
    9. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    10. Rodrik, Dani, 1997. "The 'paradoxes' of the successful state," European Economic Review, Elsevier, vol. 41(3-5), pages 411-442, April.
    11. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    12. Jakob Haan, 2007. "Political institutions and economic growth reconsidered," Public Choice, Springer, vol. 131(3), pages 281-292, June.
    13. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521790321.
    14. -, 1986. "Agenda = Agenda," Series Históricas 8749, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    15. Kurrild-Klitgaard, Peter & Svendsen, Gert Tinggaard, 2003. "Rational Bandits: Plunder, Public Goods, and the Vikings," Public Choice, Springer, vol. 117(3-4), pages 255-272, December.
    16. Jan- Sturm & Jakob de Haan, 2005. "Determinants of long-term growth: New results applying robust estimation and extreme bounds analysis," Empirical Economics, Springer, vol. 30(3), pages 597-617, October.
    17. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
    18. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    19. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    20. David Stasavage, 2002. "Private Investment and Political Institutions," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 41-63.
    21. Gwartney, James & Lawson, Robert, 2003. "The concept and measurement of economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 405-430, September.
    22. Douglass C, North, 1992. "Institutions, Ideology, and Economic Performance," Cato Journal, Cato Journal, Cato Institute, vol. 11(3), pages 477-496, Winter.
    23. Mueller,Dennis C. (ed.), 1997. "Perspectives on Public Choice," Cambridge Books, Cambridge University Press, number 9780521553773.
    24. Kittel, Bernhard & Winner, Hannes, 2002. "How reliable is pooled analysis in political economy? The globalization welfare state nexus revisited," MPIfG Discussion Paper 02/3, Max Planck Institute for the Study of Societies.
    25. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    26. William F. Shughart II & Laura Razzolini (ed.), 2001. "The Elgar Companion to Public Choice," Books, Edward Elgar Publishing, number 459.
    27. Kurrild-Klitgaard Peter & Berggren Niclas, 2004. "Economic Consequences of Constitutions: A Theory and Survey," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 14(1), pages 1-41, March.
    28. David Stasavage, 2002. "Private Investment and Political Institutions," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 41-63.
    29. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
    30. Locke, John, 1690. "Two Treatises of Government," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number locke1690a.
    31. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
    32. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    33. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    34. Tsebelis, George, 1995. "Decision Making in Political Systems: Veto Players in Presidentialism, Parliamentarism, Multicameralism and Multipartyism," British Journal of Political Science, Cambridge University Press, vol. 25(3), pages 289-325, July.
    35. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    36. Charles K. Rowley & Matthew Dobra, 2003. "The Glorious Revolution of 1688: Successful Constitutional and Institutional Adjustment in a Period of Rapid Change," Chapters, in: Ram Mudambi & Pietro Maria Navarra & Giuseppe Sobbrio (ed.), Economic Welfare, International Business and Global Institutional Change, chapter 11, Edward Elgar Publishing.
    37. James Dorn, 1991. "Madison's constitutional political economy: Principles for a liberal order," Constitutional Political Economy, Springer, vol. 2(2), pages 163-186, March.
    38. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mogens Justesen & Peter Kurrild-Klitgaard, 2013. "Institutional interactions and economic growth: the joint effects of property rights, veto players and democratic capital," Public Choice, Springer, vol. 157(3), pages 449-474, December.
    2. Peter Kurrild-Klitgaard, 2012. "Modeling constitutional choice: reflections on The Calculus of Consent 50 years on," Public Choice, Springer, vol. 152(3), pages 407-413, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mogens Justesen & Peter Kurrild-Klitgaard, 2013. "Institutional interactions and economic growth: the joint effects of property rights, veto players and democratic capital," Public Choice, Springer, vol. 157(3), pages 449-474, December.
    2. Justesen, Mogens K., 2008. "The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970-1999," European Journal of Political Economy, Elsevier, vol. 24(3), pages 642-660, September.
    3. Carl Henrik Knutsen, 2012. "Democracy and economic growth: A survey of arguments and results," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 15(4), pages 393-415, December.
    4. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.
    5. Stefan Voigt, 2011. "Positive constitutional economics II—a survey of recent developments," Public Choice, Springer, vol. 146(1), pages 205-256, January.
    6. Haggard, Stephan & Tiede, Lydia, 2011. "The Rule of Law and Economic Growth: Where are We?," World Development, Elsevier, vol. 39(5), pages 673-685, May.
    7. Knutsen, Carl Henrik, 2013. "Democracy, State Capacity, and Economic Growth," World Development, Elsevier, vol. 43(C), pages 1-18.
    8. Carlos Scartascini & Mariano Tommasi & Ernesto Stein, 2010. "Veto Players and Policy Trade-Offs- An Intertemporal Approach to Study the Effects of Political Institutions on Policy," Research Department Publications 4660, Inter-American Development Bank, Research Department.
    9. Kapas Judit & Czegledi Pal, 2010. "Economic Freedom and Government: A Conceptual Framework," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 16(1), pages 1-26, October.
    10. Flachaire, Emmanuel & García-Peñalosa, Cecilia & Konte, Maty, 2014. "Political versus economic institutions in the growth process," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 212-229.
    11. Lindert, Peter H., 2003. "Voice and Growth: Was Churchill Right?," The Journal of Economic History, Cambridge University Press, vol. 63(2), pages 315-350, June.
    12. Dino Falaschetti, 2004. "Can Voting Reduce Welfare? Evidence from the US Telecommunications Sector," Public Economics 0401009, University Library of Munich, Germany.
    13. Dino Falaschetti, 2003. "Voter Turnout, Regulatory Commitment, and Capital Accumulation: Evidence from the US Telecommunications Sector," Microeconomics 0311002, University Library of Munich, Germany.
    14. Sebastian Coll, 2008. "The origins and evolution of democracy: an exercise in history from a constitutional economics approach," Constitutional Political Economy, Springer, vol. 19(4), pages 313-355, December.
    15. Xosé Carlos Arias & Gonzalo Caballero, 2003. "Instituciones, costos de transacción y políticas públicas: un panorama," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 5(8), pages 117-146, January-J.
    16. Dino Falaschetti, 2004. "Can Voting Reduce Welfare? Evidence from the US Telecommunications Sector," Public Economics 0401006, University Library of Munich, Germany.
    17. Jong-A-Pin, Richard, 2009. "On the measurement of political instability and its impact on economic growth," European Journal of Political Economy, Elsevier, vol. 25(1), pages 15-29, March.
    18. Witold Jerzy Henisz, 2004. "Political Institutions and Policy Volatility," Economics and Politics, Wiley Blackwell, vol. 16(1), pages 1-27, March.
    19. Andrea Asoni, 2008. "Protection Of Property Rights And Growth As Political Equilibria," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 953-987, December.
    20. Mohammad Amin & Priya Ranjan, 2008. "When Does Legal Origin Matter?," Working Papers 080912, University of California-Irvine, Department of Economics.

    More about this item

    Keywords

    Constitutions; democracy; economic growth; veto players; public choice; constitutional economics;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36063. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.