Income growth, ethnic polarization, and political risk: Evidence from international oil price shocks

•We explore the effects of growth in countries’ national incomes on political risk.•IV estimation is used to this end.•We find that income growth has a negative effect on countries’ political risk.•The marginal growth effect on political risk decreases with ethnic polarization. This paper studies th...

Full description

Saved in:
Bibliographic Details
Published in:Journal of Comparative Economics 2015-08, Vol.43 (3), p.575-594
Main Authors: Brückner, Markus, Gradstein, Mark
Format: Article
Language:English
Subjects:
Crude oil prices
Economic growth
Ethnic polarization
Income distribution
Income growth
Minority & ethnic groups
Political risk
Politics
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:•We explore the effects of growth in countries’ national incomes on political risk.•IV estimation is used to this end.•We find that income growth has a negative effect on countries’ political risk.•The marginal growth effect on political risk decreases with ethnic polarization. This paper studies the effects of growth in countries’ national incomes on political risk. To address causality, we use the annual growth rate of the international oil price weighted with countries’ average oil net-export GDP shares as an instrument for national income growth. Our instrumental variables analysis yields two main results: (i) income growth has on average a significant negative effect on countries’ political risk; (ii) the marginal effect of income growth on political risk is significantly decreasing in cross-country differences in ethnic polarization, so much so that at high levels of ethnic polarization income growth increases political risk while at low levels of ethnic polarization income growth reduces political risk.
ISSN:0147-5967
1095-7227
DOI:10.1016/j.jce.2014.05.005