Master's Culminating Experience
The countries of Sub-Saharan Africa have experienced both poor economic performance and substantial political instability since their independence. There have been numerous studies investigating the possible relationship between political instability and economic growth. The common approach to investigating this relationship is to measure the effect of economic growth on the probability of political instability. This paper takes the opposite approach by investigating the effects of political instability on economic growth. We believe that political instability disrupts the economic system causing a reduction in growth. We measure this effect using regression analysis to estimate two models we have developed. The first model is a single equation model where we have expanded a neoclassical growth model to include a measure of political instability. The second model is a simultaneous model where in addition to the single equation above, we have added a second equation to estimate an investment variable used in the first equation. We found the estimated coefficients for political instability in both models are negative with the political instability coefficient for the simultaneous model some 18.7 percent larger than for the single equation OLS model. Given whatever model is used, the results that we have found supports the theory that political instability reduces economic growth. Therefore, any policy action taken by decision makers in Sub-Saharan Africa concerning economic growth, would have to address the problem of political instability.
Willis, G. W.
(1990). The Effects of Political Instability on Economic Growth: A Case for Sub-Saharan Africa. .