POLITICAL INSTABILITY AND ECONOMIC.docx
5
POLITICAL INSTABILITY AND ECONOMIC GROWTH: AN EMPIRICAL EVIDENCE FROM THE BALTIC STATES L. Grochova, L. Ko!a Received: December 17, 2010 Qamr2summary Or a"# "$ %o %&$% %h& %h&or' (oc$&) o* +o "%"ca $% a!" "%' &#+" r" ca ' "* or)&r %o &*r"ch %h& $%)"&$ -"%h r&c&*% Ero+&a* r&$%$. Th&r& a r& )"$ %"*"$h&) %-o %'+&$ o( +o "%"ca "*$% a!" "% ' / & "%& a* ) *o*0& " %& / "* %o+" ca "%&ra%r &. Wh"& *o*0&"%& +o"%"ca "*$%a!""%' co*c&r *$ a!o% v" o &*% co+$, r" o%$ or c" v" -ar$, & "%& +o"%"ca "*$%a!""%' "$ r&+r&$&* %&) -"%h 1$o2 cha* & $3 $ch a$ o v&r*#&*% !r&a4)o-*$, (ra " & #a5or"%' or #"*or"%' ov&r*#&*%$. A *#!&r o( ov&r*#&*% cha*&$ "$ $&) a$ a +ro6' o( &"%& +o"%"ca "*$%a!""%'. For #or& %ha* a$% 78 )&ca)&$, *&- +o"%"ca &co*o#"c$ ha$ !&&* )&a"* -"%h %h&or"&$ o( &co*o#"c ro-%h 9(or &6a#+& "* &*%"a co*%r"!%"o*$ !' Ma*cr O$o*, Da*" Ro)r"4;. Ho-&v&r, &$$ a%%&*%"o* ha$ !&&* +a") %o %h&"r &#+"r"ca v&r"< ca%"o*. Th& *&- +o"%"ca &co*o#"c$ ro-%h %h&or' )&< *&$ $o#& (ac%or$ %ha% ar& *&c&$$ar' (or &co*o#"c ro-%h a#o* -h"ch +o"%"ca $%a!""%'. Or ar #&*%a%"o* "$ !a$&) o* (o o-"* a$$#+%" o*$ a!o% %h& &6%&*% o( +o"%"ca $%a!""%' -"%h"* %h& ro+ o( $cc&$$( %ra*$"%"o* co*%r"&$. Th& V"$&ra) $%a%&$, Sov&*"a* a*) %h& Ba%"c $%a%&$ ar&
Transcript of POLITICAL INSTABILITY AND ECONOMIC.docx
POLITICAL INSTABILITY AND ECONOMICGROWTH: AN EMPIRICAL EVIDENCEFROM THE BALTIC STATESL. Grochova, L. KoubaReceived: December 17, 2010Qamr2summary
Our aim is to testthe theory focused on political stability empirically in order to enrich the studies with recent Europeanresults.There are distinguished two typesof political instability elite and non-elite in topical literature. While non-elite political instabilityconcerns about violent coups, riots or civil wars, elite political instability is represented with so_changes such as government breakdowns, fragile majority or minority governments. A number ofgovernment changes is used as a proxy of elite political instability. For more than last 20 decades, new political economics has been dealing with theories of economicgrowth (for example infl uential contributions by Mancur Olson, Dani Rodrik). However, less attentionhas been paid to their empirical verifi cation. The new political economics growth theory defi nessome factors that are necessary for economic growth among which political stability. Our argumentation is based on following assumptions about the extent of political stability withinthe group of successful transition countries. The Visegrad states, Slovenian and the Baltic states arestable and safe democratic countries without threats of civil wars or violent coups, however, they experienceelite political instabilty. That is why we show that even in relatively politically instable economiesin the elite sence the economic growth has been extraordinarily fast since 1990. In this paper,we off er an evidence of our thoery on the case of the Baltic States where high growth rates have beenachieved during the last two decades, their political environment being characterized with a highnumber of cabinet changes.For the empirical part a single-equation approach was chosen to exam the infl uence of elite politicalinstability on economic growth in the Baltic states. The model has a form of augmented productionfunction and includes growth rates of investments, exports, and labour as independent variables andgovernment changes as an elite political instability dummy variable. The data resulting from estimationsapplying GMM and GLS because of endogeneity and autocorrelation problems are statisticallysignifi cant for all three countries and confi rm our hypothesis that elite political stability is a necessarycondition for economic growth. The case of the Baltic states so positively shows that countries cangrow very fast even in the environment of signifi cant elite political instability.REFERENCESAISEN, A. and VEIGA, F. J., 2010: How does politicalinstability aff ect economic growth? NIPE WorkingPapers 5/2010, NIPE - Universidade do Minho.ALESINA, A., OZLER, S., ROUBINI, N. and SWAGEL,P., 1996: Political Instability and EconomicGrowth. Journal of Economic Growth, Vol. 1(2): 189211.ARON, J., 2000: Growth and Institutions: A Reviewof the Evidence. World Bank, The World Bank ResearchObserver, 2000, Vol. 15(1).BARRO, R. J, LEE. J., 1994: Sources of EconomicGrowth, Carnegie Rochester Conference Series onPublic Policy.CHANG, HA-JOON, 2006: Understanding the Relationshipbetween Institutions and EconomicDevelopment. UNU-WIDER. [cit. 2007-07-25].Cited from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=914620#PaperDownload.CONRAD, GOLDER, 2010: Measuring governmentduration and stability in Central Eastern Europeandemocracies. European Journal of Political Research,49: 119150.DARBY, J., LI C.-W. and MUSCATELLI, V. A., 2004:Political Uncertainty, Public Expenditure, andGrowth. European Journal of Political Economy, Vol.20: 153179.DOUCOULIAGOS, H., ULUBASOGLU, M., 2007:Democracy and Economic growth: A meta-analysis.Public Choice World Meeting 2007. [cit. 2007-07-25]. Cited from http://www.creedexperiment.nl/pc2007/ocs/viewpaper.php?id=75.ENDERS, W., 1995: Applied Econometric Time Series.New York: Wiley; ISBN 0 471 451738.FEDER, G., 1983: On Exports and Economic Growth.Journal of Development Economics, Vol. 12(12): 5973.FOSU, A. K., 1992: Political Instability and EconomicGrowth: Evidence from Sub-Saharan Africa. EconomicDevelopment and Cultural Change, Vol. 40(4):829841.GYIMAH-BREMPONG, K. and DAPAAH, A. S.,1996: Non Elite Political Instability and EconomicGrowth: Evidence from Sub-Saharan Africa. Journalof Economic Development, Vol. 21(1): 181210.JONG-A-PIN, R., 2009: On the measurement ofpolitical instability and its impact on economicPolitical instability and economic growth: an empirical evidence from the Baltic states 87growth. European Journal of Political Economy, Vol. 25:1529.JUTTING, J., 2003: Institutions and Development:A Critical Review. OECD Development Centre,Working Paper No. 210.KRIECKHAUS, J. 2006: Democracy and economicgrowth: how regional context infl uences regimeeff ects. British Journal of Political Science, April.KRUEGER, A. O., 1980: Trade Policy as an Input toDevelopment. The American Economic Review, Vol.70(2): 288292.LINDERT, P. H., 2003: Voice And Growth: WasChurchill Right? Journal of Economic History, Vol. 63(2, Jun). [cit. 2007-08-08]. Cited from http://www.nber.org/papers/w9749.pdf.MANKIW, N. G., ROMER, D. and WEIL, D. N., 1992:A Contribution to the Empirics of EconomicGrowth. The Quarterly Journal of Economics, Vol.107(2): 407437.PRZEWORSKI, A., LIMOGNI, F., 1993: Political Regimesand Economic Growth. The Journal of EconomicPerspectives, No. 3. ISSN 0895-3309.QURESHI, M. N., ALI, K., KHAN, I. R., 2010: PoliticalInstability and Economic Development: PakistanTime-Series Analysis. International Research Journalof Finance and Economics, Issue 56. ISSN 1450-2887.RAM, R., 1987: Exports and Economic Growth inDeveloping Countries: Evidence from Time-Seriesand Cross-Section Data. Economic Developmentand Cultural Change, Vol. 36(1): 5172.RODRIK, D., 1997: Democracy and Economic Performance[cit. 2007-08-08]. Cited from www.j-bradford-delong.net/Teaching_Folder/Econ_202c/readberk/9-Political_Economy/demoecon.PDF.RODRIK, D., 2000: Institutions for High-QualityGrowth: What They Are and How to AcquireThem. NBER, Working paper No. 7540.RODRIK, D., SUBRAMANIAN, A., TREBBI, F., 2002:Institutions Rule: The Primacy of Instituttionsover Geography and Integration in Economic Development.NBER, Working Paper No. 9305.TYLER, W. G., 1981: Growth and Export Expansionin Developing Countries. Journal of DevelopmentEconomics, Vol. 9(3): 121130.VANIERIS, YIANNIS P., GUPTA, D. K., 1986: IncomeDistribution and Socio-political Instabilityas Determinants of Savings; A Cross-SectionalModel, Journal
