Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Introduction
- 2 Coalition politics and economic development
- 3 Coalition politics and economic development
- 4 Coalition politics and economic development
- 5 Coalition dharma and India shining
- 6 Developing coalitions in Italy, Spain, Brazil, and Botswana
- 7 Conclusion
- A Appendix to Chapter 2
- B Appendix to Chapter 3
- C Appendix to Chapter 4
- D Appendix to Chapter 5
- References
- Index
4 - Coalition politics and economic development
Mechanisms
Published online by Cambridge University Press: 04 February 2011
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- 1 Introduction
- 2 Coalition politics and economic development
- 3 Coalition politics and economic development
- 4 Coalition politics and economic development
- 5 Coalition dharma and India shining
- 6 Developing coalitions in Italy, Spain, Brazil, and Botswana
- 7 Conclusion
- A Appendix to Chapter 2
- B Appendix to Chapter 3
- C Appendix to Chapter 4
- D Appendix to Chapter 5
- References
- Index
Summary
Credible constraints improve national economic performance. Statistical analysis of cross-national data for over a hundred developing countries presented in the last chapter shows that constraints against policy change reduce the volatility of growth and increase its mean level. Thus, in the presence of such constraints, growth is both higher and more stable. And this result is robust to controlling for other factors that explain economic growth, as well as for democracy. Indeed, when we limit our investigation to those countries that have a deep experience with democratic rules for choosing leaders, the existence of coalition government still proves to be an important determinant of economic performance. But why?
The causal mechanism implied by the theoretical framework presented in Chapter 2 is that credible constraints against policy change encourage private economic actors to engage in increased investment activity because they do not have to worry that the government will change policies arbitrarily, unilaterally, or drastically. That is, the argument posits a strong status quo bias on the part of private economic actors, an assumption supported by previous research (Aizenman and Marion 1999; Bechtel and Füss 2008; Henisz 2002; Jensen 2006). The findings presented above are consistent with the major empirical implications of the theoretical framework: if investors fear policy uncertainty, and if the dispersion of policymaking authority across multiple actors reduces such policy uncertainty, then investors should invest more in the presence of such credible constraints against policy change, and national economic performance should improve.
- Type
- Chapter
- Information
- Coalition Politics and Economic DevelopmentCredibility and the Strength of Weak Governments, pp. 103 - 124Publisher: Cambridge University PressPrint publication year: 2010