We thank Rob Franzese, Avner Greif, Geert Hofstede, Cem Karayalcin, Dani Rodrik, Shalom Schwartz, Mehmet Ali Ulubasoglu and an anonymous referee for their many helpful comments and suggestions.
Institutions and Growth Volatility*
Article first published online: 23 MAY 2011
© 2011 The Economic Society of Australia
Economic Papers: A journal of applied economics and policy
Volume 30, Issue 2, pages 233–252, June 2011
How to Cite
Anbarci, N., Hill, J. and Kirmanoglu, H. (2011), Institutions and Growth Volatility. Economic Papers: A journal of applied economics and policy, 30: 233–252. doi: 10.1111/j.1759-3441.2011.00114.x
- Issue published online: 23 MAY 2011
- Article first published online: 23 MAY 2011
- democratic institutions;
- investment volatility;
- growth volatility
Recently some studies provided evidence that democratic political institutions generate less volatile growth. These studies, however, do not provide any link between democracy and investment volatility. Here, we focus on the specific channel that links individualistic societies and low growth volatility. We test whether investment volatility and consequently growth volatility are lower in individualistic societies. We construct a two-equation system of investment and income growth volatility, allowing various measures of individualism to influence growth volatility both directly and indirectly. We find that individualism significantly directly and indirectly influences growth volatility negatively.