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Institutions of Conflict Management and Economic Growth in the European Union

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  • Friedrich Schneider
  • Alexander F. Wagner

Abstract

High‐quality institutions of conflict management can serve to mitigate the negative effects of adverse external shocks and social conflict on long‐run economic growth. But in addition to the benefits (production‐enhancing cooperation), there are also costs (taxes and rent‐seeking) of conflict‐management institutions like corporatism and trust. We examine both positive and negative influences in the context of a simple growth model. Contrary to previous research, we predict a non‐linear relationship between institutions and growth. The empirical evidence from a panel for the years 1961‐1995 shows that neo‐corporatism and trust have each had independent positive effects on long‐run growth in the EU, suggesting that the diminishing product range of institutions has not yet been reached. Under an increasing size of government, however, both institutions lead to a dominating negative rent‐seeking effect. Our thanks for helpful comments go to the editors, an anonymous referee, Karl Aiginger, Mathias Dufour, Frauke Skudelny, Robert Urbatsch, seminar participants at the University of Linz, the Austrian Institute for Economic Research and discussants at the European Public Choice Society Meeting 2000 in Siena. All remaining errors are ours, of course. An extended version of this paper is available from the authors on request (Schneider and Wagner 2001). Further results are discussed in Wagner (2000).

Suggested Citation

  • Friedrich Schneider & Alexander F. Wagner, 2001. "Institutions of Conflict Management and Economic Growth in the European Union," Kyklos, Wiley Blackwell, vol. 54(4), pages 509-531, November.
  • Handle: RePEc:bla:kyklos:v:54:y:2001:i:4:p:509-531
    DOI: 10.1111/1467-6435.00167
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    Cited by:

    1. Friedrich Schneider & Alexander F. Wagner & Mathias Dufour, 2003. "Satisfaction not guaranteed-Institutions and satisfaction with democracy in Western Europe," Economics working papers 2003-03, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Saakshi Jha & Sunny Bhushan & Nupur Nirola, 2024. "Is geopolitical risk always detrimental to economic growth?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-31, April.
    3. Czyżewski, Bazyli & Matuszczak, Anna, 2018. "Rent-seeking in agricultural policy revisited: a new look at the Common Agricultural Policy consensus," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 120(2), August.
    4. Friedrich Schneider & Stefan Haigner & Stefan Jenewein & Florian Wakolbinger, 2014. "Institutions of conflict management and economic growth revisited: a short note," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(3), pages 577-587, August.
    5. Slesman, Ly & Baharumshah, Ahmad Zubaidi & Ra'ees, Wahabuddin, 2015. "Institutional infrastructure and economic growth in member countries of the Organization of Islamic Cooperation (OIC)," Economic Modelling, Elsevier, vol. 51(C), pages 214-226.
    6. Wagner, Alexander F. & Schneider, Friedrich & Halla, Martin, 2009. "The quality of institutions and satisfaction with democracy in Western Europe -- A panel analysis," European Journal of Political Economy, Elsevier, vol. 25(1), pages 30-41, March.
    7. repec:wvu:wpaper:09-05 is not listed on IDEAS

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