Reinvestigating the Economic Effects of Political Instability

• In Event: Poster Session II: Comparative Politics

Abstract

Although there is a substantial body of research insisting on the importance of stability for economic development (see, i.e., Alesina et al 1992, Aisen and Veiga 2011), some studies also suggest the opposite. That is, that political stability either makes economic policy lazy or, when occurring in autocracies, is inherently detrimental to growth because of incumbents' structural interest in prohibiting development (see, i.e., Bueno de Mesquita 2000, Guidolin and La Ferrara 2010). I argue that the discrepancy in the literature is rooted in which end of the instability spectrum each study examines, and that the overall relationship in question should rather be expected to appear in bell-shaped form. In other words, I argue that it is medium instability that induces growth in the long run, and that negative effects of instability are found at both extremes of the instability spectrum. Furthermore, the issue of measurement inconsistencies in the study of political instability has recently been revisited (Wright and Bak 2016), indicating that existing studies might be critically vulnerable to alternative variable specifications. Based on the newly completed and de facto-based Historical Regimes Dataset, which covers most polities of the world from 1789 to 2016 totaling over 1900 distinct regimes and regime end types, I replicate and challenge six influential studies of the relationship. Through semiparametric regression modelling, taking both complex time-series dynamics and the highly endogenous nature of the data into account, I find strong and robust support for the suggested relationship.

Author

• Vilde Lunnan Djuve, Aarhus University