Where Did All the Growth Go? External Shocks, Social Conflict and Growth Collapses
CEPR Discussion Paper Series No. 1789
Posted: 25 Jun 1998
Date Written: January 1998
This paper argues that domestic social conflicts are a key to understanding why growth rates lack persistence and why so many countries have experienced a growth collapse after the mid-1970s. It emphasizes, in particular, the manner in which social conflicts interact with external shocks on the one hand, and the domestic institutions of conflict-management on the other. Econometric evidence provides support for this hypothesis. Countries that experienced the sharpest drops in growth after 1975 were those with divided societies (as measured by indicators of inequality, ethnic fragmentation, etc.) and with weak institutions of conflict management (proxied by indicators of the quality of governmental institutions, rule of law, democratic rights, and social safety nets).
JEL Classification: O40
Suggested Citation: Suggested Citation