Political Institutions and Output Collapses

Political Institutions and Output Collapses
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Volume/Issue: Volume 2023 Issue 036
Publication date: February 2023
ISBN: 9798400225802
$20.00
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Economics / General , Economic growth , autocracy , democracy

Summary

Major output collapses are costly and frequent in the developing world. Using cross-country data, we classify five-year periods using a two-dimensional state space based on growth regimes and political institutions. We then model the joint evolution of output growth and political institutions as a finite state Markov chain, and study how countries move between states. We find that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.