Long Live Democracy: The Determinants of Political Instability in Latin America

Abstract

We investigate the underlying causes of political instability in a panel of 18 Latin American countries from 1971–2000. We test whether regime type, regime durability, factionalism, income inequality, ethnic diversity, ethnic discrimination, regional spillover effects, urban growth and macroeconomic variables matter for instability. We find several important results: (1) democracy has a significant negative effect on instability that is robust to several alternative specifications; (2) factionalised political systems experience higher instability; (3) income inequality, ethnic fractionalisation, and urban growth have important nonlinear effects on instability; and (4) of the macroeconomic variables we study, only openness to trade has a significant negative effect on instability.

Keywords: Political Instability, Democracy, Latin America

JEL Classification: O10, O54