IDEAS home Printed from https://ideas.repec.org/a/mup/actaun/actaun_2011059020081.html
   My bibliography  Save this article

Political instability and economic growth: an empirical evidence from the Baltic states

Author

Listed:
  • Ladislava Grochová

    (Ústav ekonomie, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika)

  • Luděk Kouba

    (Ústav ekonomie, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika)

Abstract

For more than last 20 decades, new political economics has been dealing with theories of economic growth (for example influential contributions by Mancur Olson, Dani Rodrik). However, less attention has been paid to their empirical verification. The new political economics growth theory defines some factors that are necessary for economic growth among which political stability. Our aim is to test the theory focused on political stability empirically in order to enrich the studies with recent European results. The paper uses a single-equation model to reject a hypothesis that political stability is a necessary condition for economic growth finding a relationship between economic growth and political instability. A demonstration that political stability is not a crucial factor for economic development in general then represents the main goal of the contribution. There are distinguished two types of political instability - elite and non-elite - in topical literature. While non-elite political instability concerns about violent coups, riots or civil wars, elite political instability is represented with "soft changes" such as government breakdowns, fragile majority or minority governments. A number of government changes is used as a proxy of elite political instability. The disproof of the hypothesis is demonstrated on data from the Baltic states where number of government changes takes place and still fast economic growth could be seen within last two decades. Since it is shown that political instability has almost no impact on economic growth, we consider the hypothesis regarding a necessity of political stability for economic development to be only a specific non-generalizable case.

Suggested Citation

  • Ladislava Grochová & Luděk Kouba, 2011. "Political instability and economic growth: an empirical evidence from the Baltic states," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 59(2), pages 81-88.
    • Handle: RePEc:mup:actaun:actaun_2011059020081
    DOI: 10.11118/actaun201159020081
    as

    Download full text from publisher

    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201159020081.html
    Download Restriction: free of charge
    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201159020081.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.11118/actaun201159020081?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Kartik Roy & Jörn Sideras (ed.), Institutions, Globalisation and Empowerment, chapter 2, Edward Elgar Publishing.
    2. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
    3. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    4. Ram, Rati, 1987. "Exports and Economic Growth in Developing Countries: Evidence from Time-Series and Cross-Section Data," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 51-72, October.
    5. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    6. Tyler, William G., 1981. "Growth and export expansion in developing countries : Some empirical evidence," Journal of Development Economics, Elsevier, vol. 9(1), pages 121-130, August.
    7. Hristos Doucouliagos & Mehmet Ali Ulubaşoğlu, 2008. "Democracy and Economic Growth: A Meta‐Analysis," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 61-83, January.
    8. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    9. Jong-A-Pin, Richard, 2009. "On the measurement of political instability and its impact on economic growth," European Journal of Political Economy, Elsevier, vol. 25(1), pages 15-29, March.
    10. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    11. Fosu, Augustin Kwasi, 1992. "Political Instability and Economic Growth: Evidence from Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 40(4), pages 829-841, July.
    12. Krueger, Anne O, 1980. "Trade Policy as an Input to Development," American Economic Review, American Economic Association, vol. 70(2), pages 288-292, May.
    13. Lindert, Peter H., 2003. "Voice and Growth: Was Churchill Right?," The Journal of Economic History, Cambridge University Press, vol. 63(2), pages 315-350, June.
    14. Darby, Julia & Li, Chol-Won & Muscatelli, V. Anton, 2004. "Political uncertainty, public expenditure and growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 153-179, March.
    15. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    16. Johannes Jütting, 2003. "Institutions and Development: A Critical Review," OECD Development Centre Working Papers 210, OECD Publishing.
    17. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    18. Lindert, Peter H., 2003. "Voice and Growth: Was Churchill Right?," The Journal of Economic History, Cambridge University Press, vol. 63(02), pages 315-350, June.
    19. Mr. Arvind Subramanian & Mr. Francesco Trebbi & Mr. Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 2002/189, International Monetary Fund.
    20. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," The World Bank Research Observer, World Bank, vol. 15(1), pages 99-135, February.
    21. Ha-Joon Chang, 2006. "Understanding the Relationship between Institutions and Economic Development: Some Key Theoretical Issues," WIDER Working Paper Series DP2006-05, World Institute for Development Economic Research (UNU-WIDER).
    22. Krieckhaus, Jonathan, 2006. "Democracy and Economic Growth: How Regional Context Influences Regime Effects," British Journal of Political Science, Cambridge University Press, vol. 36(2), pages 317-340, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Atindra Dahal, 2020. "Re-defining Modernity and Development Dimension in Quest of Indigenous and Ingenuous Prosperity of Himalayan Region," Technium Social Sciences Journal, Technium Science, vol. 3(1), pages 11-25, February.
    2. Michal Mádr & Luděk Kouba, 2015. "Does the Political Environment Affect Inflows of Foreign Direct Investment? Evidence from Emerging Markets," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 2017-2026.
    3. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    4. Vladimír Žítek & Viktorie Klímová, 2013. "Position and development potential of north-eastern Baltic Sea regions," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(4), pages 1203-1211.
    5. Ladislava Grochova & Ludek Kouba, 2010. "Elite Political Instability and Economic Growth: An Empirical Evidence from the Baltic States," MENDELU Working Papers in Business and Economics 2010-01, Mendel University in Brno, Faculty of Business and Economics.
    6. Nikola Najman & Petr Rozmahel & Luděk Kouba & Ladislava Grochová, 2013. "Integration of Central and Eastern European Countries: Increasing EU Heterogeneity? WWWforEurope Working Paper No. 9," WIFO Studies, WIFO, number 46856.
    7. Abdul Rauf & Ameer Muhammad Aamir Abbas & Asim Rafiq & Saifullah Shakir & Saira Abid, 2022. "The Impact of Political Instability, Food Prices, and Crime Rate on Tourism: A Way toward Sustainable Tourism in Pakistan," Sustainability, MDPI, vol. 14(24), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ladislava Grochova & Ludek Kouba, 2010. "Elite Political Instability and Economic Growth: An Empirical Evidence from the Baltic States," MENDELU Working Papers in Business and Economics 2010-01, Mendel University in Brno, Faculty of Business and Economics.
    2. Luděk Kouba, 2009. "Návrh klasifikace soudobých sociálně-ekonomických přístupů k teorii růstu [The Proposal of Original Classification of Contemporary Social-Economic Approaches to the Growth Theory]," Politická ekonomie, Prague University of Economics and Business, vol. 2009(5), pages 696-713.
    3. Michal Mádr & Luděk Kouba, 2015. "The Impact of Institutional Environment on Inflows of Foreign Direct Investment in European Transition Economies and Latin American Countries [Vliv institucionálního prostředí na příliv přímých zah," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2015(1), pages 45-60.
    4. Ahmet Faruk AYSAN & Mustapha Kamel NABLI & Marie‐Ange VÉGANZONÈS‐VAROUDAKIS, 2007. "Governance Institutions And Private Investment: An Application To The Middle East And North Africa," The Developing Economies, Institute of Developing Economies, vol. 45(3), pages 339-377, September.
    5. Rodríguez-Pose, Andrés & Ketterer, Tobias, 2016. "Institutions vs. ‘First-Nature’ Geography – What Drives Economic Growth in Europe’s Regions?," CEPR Discussion Papers 11322, C.E.P.R. Discussion Papers.
    6. Aysan, Ahmet Faruk & Nabli, Mustapha Kamel & Veganzones-Varoudakis, Marie-Ange, 2006. "Governance and private investment in the Middle East and North Africa," Policy Research Working Paper Series 3934, The World Bank.
    7. Ahmet Faruk Aysan & Zeynep Ersoy & M-A Veganzones-Varoudakis, 2007. "Does the Perception of Governance Institutions Matter for Private Investment: The Case of Middle East and North Africa," Working Papers 2007/03, Bogazici University, Department of Economics.
    8. Marie-Ange Véganzonès-Varoudakis & A. Aysan, 2007. "How Do Political and Governance Institutions Affect Private Investment Decisions? An Application to the Middle East and North Africa," Post-Print hal-00229728, HAL.
    9. Ahmet Faruk Aysan & …mer Faruk Baykal & Marie-Ange Véganzonès–Varoudakis, 2011. "The Effects of Convergence in Governance on Capital Accumulation in the Black Sea Economic Cooperation Countries," Chapters, in: Mehmet Ugur & David Sunderland (ed.), Does Economic Governance Matter?, chapter 6, Edward Elgar Publishing.
    10. Celal Kucuker, 2003. "Türkiye Ýktisat Kongresi Büyüme Stratejileri Çalýþma Grubu," Working Papers 2003/5, Turkish Economic Association.
    11. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Techniques for dealing with reverse causality between institutions and economic performance," MERIT Working Papers 2012-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. John A Doces, 2020. "Democracy, consumption, and growth in sub-Saharan Africa," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 23(1), pages 28-48, March.
    13. Han, Xuehui & Wei, Shang-Jin, 2017. "Re-examining the middle-income trap hypothesis (MITH): What to reject and what to revive?," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 41-61.
    14. Tobias D. Ketterer & Andrés Rodríguez‐Pose, 2018. "Institutions vs. ‘first‐nature’ geography: What drives economic growth in Europe's regions?," Papers in Regional Science, Wiley Blackwell, vol. 97(S1), pages 25-62, March.
    15. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    16. J. Ernesto Lopez-Cordova & Christopher M. Meissner, 2005. "The Globalization of Trade and Democracy, 1870-2000," NBER Working Papers 11117, National Bureau of Economic Research, Inc.
    17. Berggren, Niclas & Bergh, Andreas & Bjørnskov, Christian, 2012. "The growth effects of institutional instability," Journal of Institutional Economics, Cambridge University Press, vol. 8(2), pages 187-224, June.
    18. Jeffry A. Jacob & Thomas Osang, 2018. "Democracy And Growth: A Dynamic Panel Data Study," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(01), pages 41-80, August.
    19. Nawaz, Saima, 2015. "Growth effects of institutions: A disaggregated analysis," Economic Modelling, Elsevier, vol. 45(C), pages 118-126.
    20. Mr. Charalambos G Tsangarides, 2005. "Growth Empirics Under Model Uncertainty: Is Africa Different?," IMF Working Papers 2005/018, International Monetary Fund.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mup:actaun:actaun_2011059020081. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ivo Andrle (email available below). General contact details of provider: https://mendelu.cz/en/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.