Economic Growth and Changes in Policies: The Role of Veto Players in Latin American and East Asian Countries

Ferreira Filho, José Alexandre

The majority of the literature considers that the establishment of stable institutions, providing better levels of security of property rights, is the key-factor to economic growth, taking into account the creation of favorable conditions to new investments and technological developments, especially considering an environment of globalization. In this sense, these "good institutions," or the so-called good governance, are closely related to the maintenance of the status quo, that is, the permanence of political and economic stabilities. On the other hand, economic growth requires, in a large way, political and economic changes to allow reforms, to make it possible. We verify, using statistical methods as Ordinary Least Squares (OLS), Least Square in Two-Stages (2QLS), Generalized Method of Moments (GMM), among others, that, despite the relevance of variables associated with good governance, the Brazilian economic growth is related negatively with the large numbers of veto players (agents with power veto) and the same happened to South American and East Asian countries. In some cases, the income growth rate is negatively related to the tenure of the veto players and their drop rate from the government basis. Thus, the weaker capacity to veto political and economic changes were associated to better economic growth rates, which does not mean one must not have institutional stability, but points out that the capacity to change the status quo is fundamental to generate conditions to economic growth in developing countries.

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More About This Work

Academic Units
Institute of Latin American Studies
Published Here
December 18, 2009