Political instability, human capital, and economic growth in Latin America

Abstract:

This paper uses time-series and cross-national data from 18 Latin American countries and a simultaneous equation model to investigate the effects of political instability (PI) on human capital formation and economic growth in less developed countries (LDCs). Endogenous growth models stress the importance of human capital in explaining economic growth. This paper differs from previous efforts at investigating the relationship between PI and economic growth in many ways. First, it focuses on the effects PI has on human capital formation as well as the growth effects of PI through reduced output from existing resources. While there is evidence that PI has a deleterious effect on investment in physical capital, researchers have not investigated the effects PI has on human capital formation. To our knowledge, this is the only study that allows PI to affect economic growth through human capital formation. Second, we use a broader measure of political instability that encompasses a wider spectrum of politically unstable events than has been used in both the economic and the political science literatures. Third, this paper focuses on Latin America-a region that has had a long history of political instability and economic stagnation yet has been ignored by economists who study the relationship between economic growth and political instability. Finally, our use of cross-national time-series data in the investigation allows us to capture country effects as well as variation through time. Our contribution to the literature lies in combining the economics and political science perspectives to investigate the relationship between PI and economic growth and applying this approach to Latin America. We note that although our approach to modeling economic growth in Latin America is a little different, it falls into an emerging category of studies that use a large number of equations to investigate macroeconomic issues in developing countries.

Año de publicación:

1998

Keywords:

Fuente:

scopus