This study focused on two themes. The first examines how political competition impacts human capital accumulation over time for one hundred fourteen countries for the period 1980 to 2010. The second theme analyzed how the level of political competition determines the level of financial development over one hundred and thirty six countries from 1960 to 2010. The study attempts to provide empirical evidence that the impact of political competition on economic growth passes through its impact on human capital formation and financial development. To address both themes, institutions as the main determinant of divergent paths of development, is employed. Institutions are human devised rules of the game that shape and govern economic, social and political interactions of the society (North, 1991). These institutions could be good or bad from the perspective of their impact on economic outcomes. Good institutions foster sustained economic growth and hence development, whereas bad institutions lock countries under stagnated economy and traps. Within the bigger institutions, there are political institutions that govern and shape political interactions of the society, which in turn determine society’s economic institutions which govern and shape economic incentives and interactions of economic agents (Acemoglu and Robinson, 2006). The political elites who are in charge of the nation decide which form of economic institution to adopt by taking into account their benefits’ calculus. It is therefore imperative to assume that there is interplay between economic institutions and political institutions which eventually predicts the variation in the level of economic outcomes of different measures across countries over time. Results indicate that there is non-monotonic relationship between the level of political competition and our outcome variables: human capital formation and financial development. It gives evidence that implementation of reforms that promote better economic outcomes, such as human capital formation and financial development in this case, depend on the political calculus of the political elites. Political elites who faced either lower or higher level of competition are likely to implement reforms or adopt technologies that will foster better economic outcomes whereas political elites who are in the intermediate level of political completion are likely to block those initiatives and thereby lower level of economic outcomes. Key words: political competition, human capital formation, financial development, democracy

Essays on the Economics of Political Replacement Effects

ASSEFA, DAWIT ZERIHUN
2017-02-24

Abstract

This study focused on two themes. The first examines how political competition impacts human capital accumulation over time for one hundred fourteen countries for the period 1980 to 2010. The second theme analyzed how the level of political competition determines the level of financial development over one hundred and thirty six countries from 1960 to 2010. The study attempts to provide empirical evidence that the impact of political competition on economic growth passes through its impact on human capital formation and financial development. To address both themes, institutions as the main determinant of divergent paths of development, is employed. Institutions are human devised rules of the game that shape and govern economic, social and political interactions of the society (North, 1991). These institutions could be good or bad from the perspective of their impact on economic outcomes. Good institutions foster sustained economic growth and hence development, whereas bad institutions lock countries under stagnated economy and traps. Within the bigger institutions, there are political institutions that govern and shape political interactions of the society, which in turn determine society’s economic institutions which govern and shape economic incentives and interactions of economic agents (Acemoglu and Robinson, 2006). The political elites who are in charge of the nation decide which form of economic institution to adopt by taking into account their benefits’ calculus. It is therefore imperative to assume that there is interplay between economic institutions and political institutions which eventually predicts the variation in the level of economic outcomes of different measures across countries over time. Results indicate that there is non-monotonic relationship between the level of political competition and our outcome variables: human capital formation and financial development. It gives evidence that implementation of reforms that promote better economic outcomes, such as human capital formation and financial development in this case, depend on the political calculus of the political elites. Political elites who faced either lower or higher level of competition are likely to implement reforms or adopt technologies that will foster better economic outcomes whereas political elites who are in the intermediate level of political completion are likely to block those initiatives and thereby lower level of economic outcomes. Key words: political competition, human capital formation, financial development, democracy
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11570/3104928
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