Political Stability and Economic Prosperity: Are Coups Bad for Growth?

84 Pages Posted: 5 Jun 2020

See all articles by Johannes Blum

Johannes Blum

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Klaus Gründler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: 2020

Abstract

We provide evidence that political instability deteriorates economic growth. We establish this result based on panel difference-in-differences strategies and dynamic panel data models using a large sample of 180 countries, a novel geocoded dataset for 2,660 regions, and micro data for about 250,000 households. We exploit coups d'état as a source of exogenous variation in political instability, as they are difficult to anticipate, mirror the political zeitgeist, and reduce measurement error. We use spatial variations and synthetic control methods for identification and find that periods of instability reduce growth by 2-3 percentage points, increase unemployment, and impair health and life satisfaction. The adverse effects are stronger for women than for men.

Keywords: coups d’état, economic growth, political stability

JEL Classification: O110, O120, D740

Suggested Citation

Blum, Johannes and Gründler, Klaus, Political Stability and Economic Prosperity: Are Coups Bad for Growth? (2020). CESifo Working Paper No. 8317, Available at SSRN: https://ssrn.com/abstract=3618841

Johannes Blum (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Dresden Branch
Einsteinstraße 3
Dresden, 01069
Germany

Klaus Gründler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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