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The growth effects of institutional instability

Niclas, Bergggren; Bergh, Andreas LU and Christian, Bjørnskov (2012) In Journal of Institutional Economics 8(2). p.187-224
Abstract
We study the effects of institutional instability on growth. Using principal components analysis, we construct measures of institutional quality and instability from the political risk index of the International Country Risk Guide. A panel-data analysis of 132 countries during 1984–2004 reveals that institutional quality, especially with regard to the legal system and the protection of property rights, is positively linked to growth. As for institutional instability, we find evidence of a positive relationship in rich countries but a negative link in poor countries, suggesting that instability may reduce problems of institutional sclerosis in the former and that instability primarily entails an increase in transactions costs and... (More)
We study the effects of institutional instability on growth. Using principal components analysis, we construct measures of institutional quality and instability from the political risk index of the International Country Risk Guide. A panel-data analysis of 132 countries during 1984–2004 reveals that institutional quality, especially with regard to the legal system and the protection of property rights, is positively linked to growth. As for institutional instability, we find evidence of a positive relationship in rich countries but a negative link in poor countries, suggesting that instability may reduce problems of institutional sclerosis in the former and that instability primarily entails an increase in transactions costs and uncertainty in the latter. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Journal of Institutional Economics
volume
8
issue
2
pages
187 - 224
publisher
Cambridge University Press
external identifiers
  • wos:000304892000003
  • scopus:84867469257
ISSN
1744-1382
DOI
10.1017/S1744137411000488
language
English
LU publication?
yes
id
b2229393-3140-414f-93a3-be60c4621edf (old id 2372322)
date added to LUP
2012-03-19 12:38:48
date last changed
2017-01-01 03:06:55
@article{b2229393-3140-414f-93a3-be60c4621edf,
  abstract     = {We study the effects of institutional instability on growth. Using principal components analysis, we construct measures of institutional quality and instability from the political risk index of the International Country Risk Guide. A panel-data analysis of 132 countries during 1984–2004 reveals that institutional quality, especially with regard to the legal system and the protection of property rights, is positively linked to growth. As for institutional instability, we find evidence of a positive relationship in rich countries but a negative link in poor countries, suggesting that instability may reduce problems of institutional sclerosis in the former and that instability primarily entails an increase in transactions costs and uncertainty in the latter.},
  author       = {Niclas, Bergggren and Bergh, Andreas and Christian, Bjørnskov},
  issn         = {1744-1382},
  language     = {eng},
  number       = {2},
  pages        = {187--224},
  publisher    = {Cambridge University Press},
  series       = {Journal of Institutional Economics},
  title        = {The growth effects of institutional instability},
  url          = {http://dx.doi.org/10.1017/S1744137411000488},
  volume       = {8},
  year         = {2012},
}