The results are helpful for policymakers targeting egypts economic growth in the short and longruns. Pdf the political instability events observed in major parts of the western world, in some northern africa countries as well as the middle east in the. The paradox of growth amidst instability our motivation in writing this book was the lack of fit between the political science and economics literatures on the political determinants of economic growth. How does political instability affect economic growth. The impact of political instability on economic growth. The role of political variables in economic performance has been receiving increasing attention in the literature. Regarding the channels of transmission, we find that political instability adversely affects growth by lowering the rates of productivity growth and, to a smaller degree, physical and human capital accumulation.
In our study, we would like to focus on malaysia, which had its fair share of political instability issues due to the differences and existence of various races. The author measured growth using the percentage of agricultural products in a countrys gdp and political instability using the. One of the logical implications of the theoretical literature on the interaction of political and economic institutions is that. The views expressed in this working paper are those of the authors and do not necessarily. The development of nation and state without firm and organized system of politics is not possible and government becomes only a tug of war amongst various interest groups. Pdf political stability and economic growth researchgate. This paper focuses on the interplay of political decisions and national economic growth in pakistan. The proceeds from that growth have been redistributed through real wage growth, utility subsidies, and the maintenance of employment in soes and the public sector. Then, the second part of the empirical analysis studies the channels of transmission. We measure this effect using regression analysis to estimate two models we have developed. This would make it important to understand how investment depends on risk factors at least partly under govern ment control, e. Executive constraint, political stability and economic growth. Economic fluctuations and growth, international finance and macroeconomics, international trade and investment.
In this essay, the relationship between political stability and economic growth is revisited in order to contribute to the debate on the necessary actions to improve the reach of public policy in. This paper investigates the relationship between political instability and per capita gdp growth in a sample of 1 countries for the period 1950 through 1982. We test this theory using a systemgmm panel estimator approach and panel data on political instability, institutions, and economic growth. During times of economic instability, people may lose. The former uses a sample covering 169 countries, the latter the case of pakistan. Economic growth and political stability are strongly related. Political instability and economic growth springerlink. This paper focuses on the effect of political instability on economic growth in the cee transition countries over the last two decades.
Thereafter i will present some theoretical explanations to why the correlation between investment and growth is high even though investment does not generate sustainedeconomicgrowth. Although pi may be defined generally to include any type of insurrection or. Also, the occurrence of a government change increases the likelihood of subsequent changes. Prepared by ari aisen and francisco jose veiga authorized for distribution by ana lucia coronel january 2011 abstract this working paper should not be reported as representing the views of the imf. Economic growth the business cycle unemployment inflation redistributive effects of inflation anticipated inflation effects of inflation on output key terms previous slide next slide end show economic growth growth in the united states improved products and services added leisure other impacts relative international growth rates. Your story matters citation alesina, alberto, sule ozler, nouriel roubini, and phillip swagel. Based on many studies, economic theories and real life experiences, we can understand that political instability has been a harmful factor that would hinder the flow of fdi and the growth of an economy. This paper tests for the inuence of political instability on uk economic growth between 1961 and 1997. Political instability and economic growth alberto alesina, sule ozler, nouriel roubini, phillip swagel. Political instability in this region, reflected in relatively frequent government changes and.
Abstract this paper investigates the relationship between political instability and per capita gdp growth in a sample of 1 countries for the period 1950 through 1982. Using an exploratory factor analysis we identify four dimensions of political instability. We define political instability as the propensity of a government collapse, and we estimate. The study empirically investigated the relationship between political stability and economic growth in nigeria for the period 1999 to 2014 using the ardl model approach. Whereas economic growth is a welldefined concept, political stability is not. On the measurement of political instability and its impact on. However, the impact of political instability on economic growth is ambiguous in the case of egypt. Effects of exports instability on economic growth 99 2. There is a very broad and dispersed empirical literature that studies the links between different sociopolitical instability variables and economic growth. In particular, recent research suggests that political instability pi is deleterious to economic growth in developing economies e. On the measurement of political instability and its impact. Zablotsky 1996 studied the relationship from a different perspective. Economic institutions shape incentives and determine the allocation of resources each set of institutions creates bene.
This paper takes the opposite approach by investigating the effects of political instability on economic growth. Although this view is widely held, it has not been subjected to a great deal of careful empirical analysis. This paper investigates the relationship between political instability and per capita gdp growth in a sample of 1 countries for the period 1950 through 1. Political instability and economic growth in developing. Chapter 8introduction to economic growth and instability.
Review of literature the detrimental effects of export instability on economic growth and investment were investigated for less developing countries by macbeen and maizels, 1968 for eleven developing countries over the time period 195060 by using single equation regression model. Financial crisis, political instability and economic growth. Economic growth during 2003 was accompanied by an impressive fall in the number of households below the poverty line and an increase in household income among the bottom 40 percent. Old and new theories of economic growth in the 1960s, growth theory consisted mainly of the neoclassical model, as developed by ramsey 1928, solow 1956, swan 1956, cass 1965, and koopmans 1965. By using the systemgmm estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of gdp per capita. Economic growth and political stability are deeply interconnected. According to the conventional wisdom, the likelihood that a country will suffer various forms of political instability rises sharply when economic growth is slow and declines when growth is fast. Learn vocabulary, terms, and more with flashcards, games, and other study tools.
Although a large number of instability measures have been used in the empirical literature, some. In a more recent paper, jongapin 2009 uses factor analysis to examine to effect of 25 political instability indicators and their effect on economic growth. Political instability and economic growth alberto alesina department of economics, harvard university, cambridge, ma 028, national bureau of economic research, and center for economic policy research. The main finding is that higher degrees of instability of the political regime lead to lower economic growth. Pdf political instability and economic growth of pakistan. Garchm models reveal negative eects of instability on growth. The uncertainty associated with an unsteadfast political environment may decrease investment and the speed of economic development. Economic fluctuations and growth, international finance and macroeconomics, international trade and investment this paper investigates the relationship between political instability and per capita gdp growth in a sample of. On the one hand, the uncertainty associated with an unstable political. By using the systemgmm estimator for linear dynamic panel data models on a sample covering up to 169 countries, and five year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of gdp per capita. Macroeconomic stability and economic growth in developing. Ali and khan 2010 find negative relationship between political instability and economic development. This increase has shown in the form of the percentage of national income changes of countries as compared to the year before.
Evidence from panel data analysis rasool dehghanzadeh shahabad submitted to the institute of graduate studies and research in partial fulfillment of the requirements for the degree of master of business administration eastern mediterranean university october 2014 gazimagusa, north cyprus. The labor market, like other markets, is determined by supply and demand. The standard definition of political instability is the propensity of a government collapse either because of conflicts or rampant competition between various political parties. No political party can hope to win a democratic election on a platform of current sacrifices for a bright future. Political stability plays a crucial role in economic development, integration of economic modes and in. Concretely, we test the hypothesis that political instability adversely affects output growth by reducing the rates of productivity growth and of physical and human capital accumulation. The impacts of political stability on economic growth. We believe that political instability disrupts the economic system causing a reduction in growth.
Poli tical instability and economic growth the harvard community has made this article openly available. Pdf on may 31, 2018, rafijur rahman and others published political instability and economic growth in bangladesh find. As far as methodology is concerned, jongapin 2006, 2009 offers a survey how to measure political instability and its impact on economic growth. Political instability and economic growth pdf free download. The effects of political instability on economic growth. How does political instability affect economic growth by ari aisen.
Executive constraint, political stability and economic growth many scholars have advanced one or both of the following claims. The development of nation and state without firm and organized system of politics is not possible and government becomes. On the measurement of political instability and its impact on economic growth richard jongapin 22 june 2006 abstract. We examine the relationship between political instability and economic growth. Pdf this study investigates the impact of political instability on the economic growth in egypt, jordan, lebanon, and tunisia for the period of. Political stability and economic growth in nigeria 1dennis terpase nomor, ph. University of groningen essays on political instability jonga. Political instability and labor market institutions.
One feature of this model, which has been exploited seriously as an empirical hypothesis only in recent years, is the. Effects of exports instability on economic growth in saarc. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a small negative effect. This increase has shown in the form of the percentage of national income. A part of the instability will be political, so that. Pdf we study the impact of political instability on economic growth, income distribution and poverty.
Lake university of california, san diego democracy is more than just another brake or booster for the economy. Political instability, institutions, and economic growth. Finally, economic freedom and ethnic homogeneity are beneficial to growth. The purpose of this paper is to empirically determine the effects of political instability on economic growth. Also, the empirical work of barro 1996 and others suggests that health status, as measured by life expectancy or analogous ag. Pdf political stability and economic growth in asia. We define political instability as the propensity of a government collapse, and we estimate a model in which such a measure of political instability and economic growth are jointly determined. Pdf the impact of political instability on the economic growth. Political instability and economic growth of pakistan.
Political instability and economic growth econpapers. The primary result of this paper is that in countries and time periods with a high propensity of government collapses, growth is significantly lower than otherwise. In sum, article endeavors to explore the possible causes and effects of political instability in pakistan. Economic growth and political instability request pdf. Pakistan is among few countries of the world where political instability badly damaged the economic growth despite tremendous resources. Political instability and economic growth munich personal repec. We define political instability as the propensity of a government collapse, and we estimate a model in which such a measure of political instability and economic growth are jointly. Political economy of growth if institutions matter so much, why do societies choose nongrowthenhancing institutions. He proposed that slow economic growth causes political instability. We construct six variables that quantify political instability and examine the eect on growth. The main result of this paper is that in countries and time periods with a high propensity of government collapse, growth is significantly lower than otherwise.
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