Winners Never Quit, Quitters Never Grow: Using Text Mining to Measure Policy Volatility and its Link with Long-Term Growth in Latin America

37 Pages Posted: 22 Jan 2018

See all articles by Oscar Calvo‐González

Oscar Calvo‐González

World Bank

Axel Eizmendi

University of Oxford

Germán Reyes

Middlebury College - Department of Economics

Date Written: January 19, 2018

Abstract

Although there is wide recognition of the negative consequences of policy volatility for countries' long-term economic growth, there is limited empirical work on this subject. One of the reasons is the difficulty of measuring policy volatility over long periods of time, especially in developing countries. This paper contributes to this literature by constructing a proxy for policy volatility that exploits the information content of the priorities conveyed in presidential speeches. The study creates a policy volatility measure using a Latent Dirichlet Allocation algorithm on a novel data set of 953 presidential speeches in 10 Latin American countries and Spain. The paper shows that the proxy for policy volatility is negatively correlated with long-term growth over 1940-2010. The results are robust to a large set of changes in the construction of the proxy for policy volatility.

Keywords: Fiscal & Monetary Policy, Industrial Economics, Public Sector Management and Reform, Technology Industry, Technology Innovation, Economic Theory & Research, Non Governmental Organizations, Economic Growth, Consumption, Economics and Institutions

Suggested Citation

Calvo-Gonzalez, Oscar and Eizmendi, Axel and Reyes, Germán, Winners Never Quit, Quitters Never Grow: Using Text Mining to Measure Policy Volatility and its Link with Long-Term Growth in Latin America (January 19, 2018). World Bank Policy Research Working Paper No. 8310, Available at SSRN: https://ssrn.com/abstract=3105770

Oscar Calvo-Gonzalez (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Axel Eizmendi

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Germán Reyes

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States

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