Political Instability

Topics: Economics, Economic growth, Maximum likelihood Pages: 28 (7929 words) Published: August 28, 2012
Political Instability and Economic Growth
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Citation Alesina, Alberto, Sule Ozler, Nouriel Roubini, and Phillip Swagel. 1996. Political instability and economic growth. Journal of Economic Growth 1(2): 189-211.
Published Version doi:10.1007/BF00138862
Accessed August 26, 2012 11:04:19 PM EDT
Citable Link http://nrs.harvard.edu/urn-3:HUL.InstRepos:4553024 Terms of Use This article was downloaded from Harvard University's DASH repository, and is made available under the terms and conditions applicable to Other Posted Material, as set forth at

http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-ofuse# LAA
Albert0 Alesina
Sule 0zler
Nouriel Roubini
Phillip Swagel
Working Paper No. 4173
1050 Massachusetts Avenue
Cambridge, MA 02138
September 1992
We are grateful to John Londregan for generously sharing his data set and for useful conversations, Kala Krishna for letting us use her PC, Jennifer Widner for much needed help in understanding political events in Africa, Gary King for providing some data, Robert Barro, Rudi Dornbusch, John Helliwell, Ed Learner, Nancy Marion, Ronald Rogowski, Howard Rosenthal, and participants in seminars at University of Maryland, Pennsylvania, Princeton, Utah, UCLA and NBER for very useful comments and Gina Raimondo and Jane Willis for excellent research assistance. For financial support we thank National Fellows Program at Hoover Institution, Sloan, UCLA Academic Senate and Yale Social Science Research Fund, and especially IRIS at University of Maryland. This paper is part of NBER’s research programs in Growth, International Finance and Macroeconomics, and International Trade and Investment. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.

NBER Working Paper #4173
September 1992
This paper investigates the relationship between political instability and per capita GDP growth in a sample of 113 countries for the period 1950-1982. We define “political instability” as the propensity of a government collapse, and we estimate a model in which political instability and economic growth are jointly determined. 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. This effect remains strong when we restrict our definition of “government change” to cases of substantial changes of the government.

Albert0 Alesina
Department of Economics
Harvard University
Cambridge, MA 02138
and NBER
Sule Ozler
National Fellows Program
Hoover Institution
Room 203L
Stanford University
Stanford, CA 94305
and NBER
Nouriel Roubini
Department of Economics
Yale University
P.O. Box 1972 - Yale Station
New Haven, CT 06520
and NBER
Phillip Swagel
Federal Reserve Board
20th Street and
Constitution Ave, NW
Washington, D.C. 2055 1
1. Introduction
Economic growth and political stability are deeply
interconnected. On the one hand, the uncertainty associated with an unstable political environment may reduce investment and the speed of economic development. On the other hand, poor economic
performance may lead to government collapse and political unrest. This paper studies the joint determination of the propensity of government changes (our measure of “political instability”) and economic growth in a sample of 113 countries for the period 1950- 1982.

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. This effect is strong for both of the two types of government changes considered: all government turnovers including those that do not involve a significant change in ideological direction or an “irregular” transfer of power or...
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