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INVESTING IN INSTITUTIONS
Author(s) -
COMPTON RYAN A.,
GIEDEMAN DANIEL C.,
JOHNSON NOEL D.
Publication year - 2010
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2010.00370.x
Subject(s) - operationalization , proxy (statistics) , political instability , investment (military) , economics , panel data , politics , affect (linguistics) , econometrics , political science , computer science , sociology , philosophy , epistemology , machine learning , law , communication
Robust institutional change is difficult to achieve. However, it is more difficult for some countries than others. We use data on 69 countries between 1870 and 2000 to show that political instability does not always affect growth outcomes. We then develop a simple model to explain this fact in which the likelihood that “good” institutions are abandoned during periods of political uncertainty depends on the opportunity cost of doing so. We operationalize our model by using contract intensive money as a proxy for this initial investment in growth‐enhancing institutions. Cross‐sectional and panel growth regressions support the model's predictions.