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The impact of political factors on drivers of economic growth

10 December 2009

PhD Ceremony: J.J.G. Klomp, 14.45 uur, Academiegebouw, Broerstraat 5, Groningen

Dissertation: The impact of political factors on drivers of economic growth

Promotor(s): prof.dr. J. de Haan

Faculty: Economics and Business

Contact: Jeroen Klomp, 06-411 87 693, klomp_j@yahoo.com

The direct effects of political institutions on economic growth have been examined extensively in the empirical literature, albeit with mixed results. Political institutions may also have an indirect effect on growth through their impact on factors that drive economic growth. The four empirical studies in Klomp’s thesis therefore focus on the effect of the political system in place on factors that affect cross-country differences in economic performance. Klomp distinguishes between five dimensions of the political system: democracy, political instability, governance, government ideology, and policy instability.

In the first study Klomp focuses on cross-country differences in health. A major finding is that democracy has a positive effect on the health of individuals, while regime instability has a negative effect on health. He also finds that governance has a positive effect on the quality of the health care sector, while government instability has a significant negative influence on health care. In the second study he examines the effect of political variables on human capital formation. Klomp distinguishes between basic and advanced human capital. The results indicate that democracy has a positive impact on basic human capital, while regime instability negatively affects basic human capital. Furthermore, governance has a positive and government instability a negative effect on advanced human capital. The third study is about the impact of political factors on debt repayment to the International Monetary Fund (IMF). The results show that regime instability and government instability increase the probability of payment problems to the IMF, while regime instability also increases the probability of repaying the outstanding debt at once. Klomp also finds that good governance decreases the likelihood of payment problems to the IMF. Finally, the effect of cabinet ideology is ambiguous. Left wing governments have significantly more repayment problems, but the presence of a left wing government also significantly increases the likelihood that the country concerned will repay its total debt at once. In the final study Klomp investigates the relationship between political factors and economic growth volatility and conclude that democracy is negatively related to economic volatility. He finds that some dimensions of political instability and policy uncertainty increase economic volatility significantly.

Last modified:15 September 2017 3.38 p.m.

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