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The political economy of productivity growth

Year: 2022

Type: article

Abstract: This paper empirically evaluates the importance of institutions and political stability for productivity growth. We explore this relation in a novel way by evaluating the impact of political and institutional variables on the structural change and within-sector components of labor productivity growth. Our results do not provide robust evidence that democracy/autocracy affects productivity growth, either through structural change or within-sector productivity growth. However, political instability appears to have adverse effects on both components of productivity growth. Our estimates also show that economic freedom is associated with within-sector productivity growth. More precisely, our results suggest that an institutional context that favors business dynamism, that is, free entry, the growth of the more productive firms and the exit of the less productive, may be crucial for long-run productivity growth and economic development.

Source: European Journal of Political Economy

DOI: 10.1016/j.ejpoleco.2022.102185

Authors: Fernando Alexandre, Pedro Bação, Francisco José Veiga

Institutions: University of Minho, University of Coimbra

Language: English

Topic: Economic Growth and Productivity

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,890