Working Paper: CEPR ID: DP1789
Authors: Dani Rodrik
Abstract: This paper argues that domestic social conflicts are a key to understanding why growth rates lack persistence and why so many countries have experienced a growth collapse after the mid-1970s. It emphasizes, in particular, the manner in which social conflicts interact with external shocks on the one hand, and the domestic institutions of conflict-management on the other. Econometric evidence provides support for this hypothesis. Countries that experienced the sharpest drops in growth after 1975 were those with divided societies (as measured by indicators of inequality, ethnic fragmentation etc) and with weak institutions of conflict management (proxied by indicators of the quality of governmental institutions, rule of law, democratic rights, and social safety nets).
Keywords: economic growth
JEL Codes: 040
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Domestic social conflicts (measured by inequality, ethnic fragmentation) (O17) | Economic growth rates (O57) |
| Weak institutions (O17) | Economic growth rates (O57) |
| External shocks (F69) | Economic growth (O49) |
| Social conflict and institutional quality (O17) | Economic growth (O49) |
| External shocks (F69) | Economic performance (P17) |
| Distributional conflicts arising from social divisions (D74) | Economic performance (P17) |