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Politics and Productivity

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Listed:
  • Peter G. Klein
  • Hung Luu

Abstract

We use a stochastic frontier approach to study the effects of political and regulatory institutions on aggregate productivity in 39 countries from 1975 to 1990. We show that technical efficiency is positively related to policies supporting laissez-faire and political structures that promote policy stability. Moreover, models of technical efficiency incorporating both measures perform better than models including only one or the other. This suggests that economic performance depends not only on current policies but also on the confidence of market participants and outside investors that these policies will remain in place. (JEL O40, O30, H10, N40, D23) Copyright 2003, Oxford University Press.

Suggested Citation

  • Peter G. Klein & Hung Luu, 2003. "Politics and Productivity," Economic Inquiry, Western Economic Association International, vol. 41(3), pages 433-447, July.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:3:p:433-447
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    File URL: http://hdl.handle.net/10.1093/ei/cbg019
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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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