Political institutions and output collapses

Abstract

This paper examines whether major output collapses are more likely under autocracy. Using data on 123 developing countries over 1971–2016, we model the joint evolution of output growth and political institutions as a finite state Markov chain with a two-dimensional state space. We study how countries move between states. We find that growth is more likely to be sustained under democracy than under autocracy; output collapses are more likely to deepen under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.