SOCIOPOLITICAL INSTABILITY AND LONG RUN ECONOMIC GROWTH: A CROSS COUNTRY EMPIRICAL INVESTIGATION

This paper investigates the effects of sociopolitical instability on long-run growth. The impacts of socio-political instability are estimated by cross-country growth regressions for a panel of nations over a thirty-year sample period. Overall, our results are consistent with the existing literature implying that, at best, a weak relationship exists between sociopolitical instability and growth. More importantly, this relationship depends crucially on the measure of sociopolitical instability used. Specifically, while government instability and social instability measures typically have weak and, in some instances, a positive, relationship with growth, political violence indicators have a negative and significant impact on growth. Furthermore, our results indicate that sociopolitical instability has larger adverse effects on countries with higher levels of development and democracy. Although the issue of potential reverse causality is widely emphasized in the literature, our IV estimation results imply that simultaneity is not a severe problem for estimates of empirical growth models including sociopolitical instability measures. On the contrary, the effects of outlier countries and, to a lesser degree, parameter heterogeneity are much more serious problems for estimates using these variables