The Impact of Political Structure on Economic Growth: Instability or Regime Type

Different kinds of political, historical, cultural, and legal systems enforce the running of production, exchange, distribution, and agreements in certain ways. The political environment is one of the main focal points of the institutional approach to overcome the insufficiency of neo-classical growth theories. The political environment is often discussed in terms of democracy in economic growth studies, but no concrete conclusions have yet been reached. The incorporation of political instability into the analyses provides to comprehend the mixed and contradictory results of the assessment of the impact of democracy on economic growth in a way that it becomes less important in growth models, bearing in mind that the impact of political instability varies according to the extent of dimensions of instability measured in analyses. In order to more reliably and systematically identify the potential economic consequences of the characteristics of political structures, it is essential to understand the extent and scope of political instability in relation to contemporary political systems. Otherwise, the analyses will lead to contradictory results. Political instability and regime type should be introduced into the analyses simultaneously instead of favoring one over the other. Further, dissimilarities in income level, regional, and population structure across countries cause political instabilities in different countries to have distinctive impacts on economic performance.