Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311639 
Year of Publication: 
2025
Series/Report no.: 
IFN Working Paper No. 1518
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
Understanding the consequences and recovery for countries hit by adverse national events such as political crises is central to understanding long-run development dynamics. Utilizing the Coleman boat framework, we develop a micro-foundation based theoretical framework grounded in public choice theory and institutional economic theory to theorize about the productivity consequences of political coups. Our theory suggests two consequences. First, coups create regime uncertainty that distorts the judgment of entrepreneurs and firm managers, resulting in their delaying or abandoning altogether investment in potential productivity-enhancing innovation projects. Second, in addition to regime uncertainty, institutional changes in the aftermath of a coup exert long-run impacts on national productivity by creating a misalignment of the formal institutional environment. Our model allows us to disentangle the productivity effects of institutional uncertainty from actual institutional change following a political crisis. We assemble a unique longitudinal dataset consisting of 39 nations covering the period 1950-2012 to empirically test our hypotheses using panel data methods. We further explore some of the boundary conditions of our analysis.
Subjects: 
Coups
regime change
institutional change
productivity
JEL: 
E02
O31
O43
P47
Document Type: 
Working Paper

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