Political Instability, Institutional Change and Economic Growth in Brazil Since 1870

Abstract

Are institutions a deep cause of economic growth? This paper tries to answer this question in a novel manner by focusing on within-country variation, over long periods of time, using a new hand-collected data set on institutions and the power-ARCH econometric framework. Focusing on the case of Brazil since 1870, our results suggest:

(a) that both changes in formal political institutions and informal political instability affect economic growth negatively,

(b) there are important differences in terms of their short- versus long-run behaviour, and

(c) not all but just a few selected institutions affect economic growth in the long-run.

Keywords: Economic Growth, Institutions, Political Instability, Power-ARCH, Volatility

JEL Classification: C14, O40, E23, D72