Are Crises Good for Long-Term Growth? The Role of Political Institutions

50 Pages Posted: 25 Apr 2011

See all articles by Alberto Cavallo

Alberto Cavallo

Harvard University - Department of Economics

Eduardo A. Cavallo

Inter-American Development Bank (IDB) - Research Department

Date Written: September 2008

Abstract

This paper provides empirical evidence for the importance of institutions in determining the outcome of crises on long-term growth. Once unobserved country-specific effects and other sources of endogeneity are accounted for, political institutions affect growth through their interaction with crises. The results suggest that only countries with strong democracies, high levels of political competition and external constraints on government can potentially benefit from crises and use them as opportunities to enhance long-term output per capita and productivity growth.

Suggested Citation

Cavallo, Alberto and Cavallo, Eduardo A., Are Crises Good for Long-Term Growth? The Role of Political Institutions (September 2008). IDB Working Paper No. 543, Available at SSRN: https://ssrn.com/abstract=1820931 or http://dx.doi.org/10.2139/ssrn.1820931

Alberto Cavallo

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Eduardo A. Cavallo (Contact Author)

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

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