Die politische Stabilität hat in den vergangenen Jahren in vielen Ländern abgenommen. Eine neue Studie untersucht, welche realwirtschaftlichen Effekte sich durch die zunehmende Instabilität ergeben. Die Ergebnisse zeigen, dass politische Instabilität das Wirtschaftswachstum reduziert.
We compile data for 186 countries (1919 - 2016) and apply different aggregation methods to create new democracy indices. We observe that most of the available aggregation techniques produce indices that are often too favorable for autocratic regimes and too unfavorable for democratic regimes. The sole exception is a machine learning technique. Using a stylized model, we show that applying an index with implausibly low (high) scores for democracies (autocracies) in a regression analysis produces upward-biased OLS and 2SLS estimates. The results of an analysis of the effect of democracy on economic growth show that the distortions in the OLS and 2SLS estimates are substantial. Our findings imply that commonly used indices are not well suited for empirical purposes.
We present a new aggregation method - called SVM algorithm - and use this technique to produce novel measures of democracy (186 countries, 1960-2014). The method takes its name from a machine learning technique for pattern recognition and has three notable features: it makes functional assumptions unnecessary, it accounts for measurement uncertainty, and it creates continuous and dichotomous indices. We use the SVM indices to investigate the effect of democratic institutions on economic development, and find that democracies grow faster than autocracies. Furthermore, we illustrate how the estimation results are affected by conceptual and methodological changes in the measure of democracy. In particular, we show that instrumental variables cannot compensate for measurement errors produced by conventional aggregation methods, and explain why this failure leads to an overestimation of regression coefficients.
We empirically study the effects of culture and diversity on government redistribution based on a large sample of countries. To disentangle culture from institutions, our analysis employs regional instruments as well as data on the prevalence of the pathogen Toxoplasma Gondii, linguistic differences, and the frequency of blood types. Redistribution is higher in countries with (1) loose family ties and individualistic attitudes, (2) high prevalence of trust and tolerance, (3) low acceptance of unequally distributed power and obedience, and (4) a prevalent belief that success is the result of luck and connections. Apart from their direct effects, these traits also exert indirect impact by influencing the transmission of inequality to redistribution. Finally, we show that redistribution and diversity in terms of culture, ethnic groups, and religion stand in a non-linear relationship, where moderate levels of diversity impede redistribution and higher levels offset the generally negative effect.
This paper investigates the effects of government spending on key macroeconomic variables in Germany. It contributes to the ongoing debate on how to properly identify exogenous fiscal shocks in the data and on whether or not the government should intervene in the business cycle. Following Ramey (2011b), we include expectations held by consumers and firms into the standard VAR framework based on information from historical issues of the German political magazine Der Spiegel. The results suggest that government spending lowers gross domestic product, as it crowds out private consumption and investment. The findings also underscore the need to account for expectations, as failing to do so leads to significant misinterpretation of the effects of government spending. In fact, when neglecting anticipation effects, our results support the recent findings for Germany by pointing to a rather positive effect of government spending on GDP.
We empirically investigate the relationship between income inequality and redistribution, accounting for the shape of the income distribution, different development levels, and subjective perceptions. Cross-national inequality datasets that have become available only recently allow for the assessment of the link for various sample compositions and several model specifications. Our results confirm the Meltzer-Richard hypothesis, but suggest that the relation between market inequality and redistribution is even stronger when using perceived inequality measures. The findings emphasize a decisive role of the middle class, though also approving a negative impact of top incomes. The Meltzer-Richard effect is less pronounced in developing economies with less sophisticated political rights, illustrating that it is the political channel through which higher inequality translates into more redistribution.
We present a novel approach for measuring democracy based on Support Vector Machines, a mathematical algorithm for pattern recognition. The Support Vector Machines Democracy Index (SVMDI) is continuous on the 0-1-interval and enables very detailed and sensitive measurement of democracy for 185 countries in the period between 1981 and 2011. Application of the SVMDI highlights a robust positive relationship between democracy and economic growth. We argue that the ambiguity in recent studies mainly originates from the lack of sensitivity of traditional democracy indicators. Analyzing transmission channels through which democracy exerts its influence on growth, we conclude that democratic countries have better educated populations, higher investment shares, and lower fertility rates, but not necessarily higher levels of redistribution.
We present a novel approach for measuring democracy based on Support Vector Machines, a mathematical algorithm for pattern recognition. The Support Vector Machines Democracy Index (SVMDI) is continuously on the 0-1-interval and enables a very detailed measurement of democracy for 188 countries between 1981 and 2011. Application of the SVMDI highlights a robust positive relationship between democracy and economic growth. We argue that the ambiguity in recent studies mainly originates from the lack of sensitivity of traditional democracy indicators. Analyzing transmission channels we conclude that democratic countries have better educated populations, higher investment shares, and lower fertility rates, but not necessarily higher levels of redistribution.