How Does Political Instability Affect Economic Growth?

By A. Aisen, Francisco Veiga. Social Science Research Network, 2010

973 citations recorded by the source corpus.

The purpose of this paper is to empirically determine the effects of political instability on economic growth. By using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of GDP per capita. 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. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a small negative effect.

Subfields: Economics and Econometrics, Information Systems, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/791b641cb577bb2a9e016755dd4e9eb482b24bcb

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Citations in the corpus

Political stability and growth: An application of dynamic GMM and quantile regression (2017, methodology): “When we add interaction terms, we also make sure that both the variables are present independently to see the impact of interactions which is common in literature (Aisen and Veiga, 2013; Slesman et al., 2015).”
Revolution empirics: predicting the Arab Spring (2015, neutral): “For instance, Anderson (2011) has demystified the Arab Spring by parsing the differences between Tunisia, Egypt and Libya.”
The impacts of tourism, energy consumption and political instability on economic growth in the MENA countries (2014, background): “According to Aisen and Veiga (2013), political instability is likely to create volatility and frequent change in policies.”
How does foreign direct investment contribute to Sustainable Development Goals? Evidence from African countries (2020, background): “Since higher population is negatively associated with GDP, we predict a negative relationship between POP and the achievement of SDGs (Aisen and Veiga, 2013).”
Internationalization and innovation performance of emerging market enterprises: The role of host-country institutional development (2016, background): “Second, political stability affects economic growth by influencing investment in physical and human capital (Aisen & Veiga, 2013).”