Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 873: Economic Stagnation and Stable Growth: The Persistence and Survival of Growth Regimes under Political Transitions

Lilit Hakobyan ()
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Lilit Hakobyan: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden

Abstract: This paper analyses the survival of four different growth regimes conditional on political regime transitions that occurred during the first or prior year of the economic regime. The results suggest that in countries with no history of military dictatorship (MD), the episodes of fast-growing regimes initiated by political democratisation have an approximately 40% lower hazard of termination than the miracle growth episodes that were not started by political transitions. This finding does not hold in countries in which the consolidation of democracy is complicated by the historical role played by the army in the governing process. Additional analyses are carried out for the effect of political transitions on the duration of ongoing economic regimes. The data does not support the argument that “order” and the “rule of law” promote economic growth under more authoritarian regimes, which commonly feature authoritarian leaders during times of economic crisis. Political transitions of both directions under an economic crisis render the ongoing economic regime more durable. In contrast political transitions (of both directions) seem to be economically more efficient under the regime of stagnation.

Keywords: Heckman correction for selection bias; economic growth regimes; survival analyses; political transition

JEL-codes: C21; O43; O57; P16

34 pages, January 23, 2014

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