Do Political Institutions Yield Multiple Growth Regimes?
Economics Bulletin, Vol. 32 No. 2 pp. 1442-1454
13 Pages Posted: 9 Mar 2012 Last revised: 4 Jul 2012
Date Written: May 14, 2012
We investigate the effects of political institutions on economic growth. We specifically explore this relationship while controlling for heterogeneity and model uncertainty. We use threshold regression (Hansen (2000)) to search for possible nonlinearities and/or interaction effects with respect to political institutions. We also implement a novel approach to account for theory uncertainty by applying Bayesian model averaging in the threshold regression context. We find that less democratic countries, specifically those with less competitiveness in executive recruitment, follow a different growth process than those with higher competitiveness.
Keywords: Economic Growth, Institutions, Threshold Regression, Regression Trees, Bayesian Model Averaging
JEL Classification: C21, C51, O43, O47
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