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Economies 2019, 7(1), 20; https://doi.org/10.3390/economies7010020

Arab Countries between Winter and Spring: Where Democracy Shock Goes Next!

1
Economics Department, Swansea University, Swansea SA1 8EN, UK
2
Centre for Empirical Research, University of Southampton, Southampton SO17 1BJ, UK
3
Charles Perkins Centre, University of Sydney, Sydney, NSW 2006, Australia
*
Author to whom correspondence should be addressed.
Received: 20 July 2018 / Revised: 27 January 2019 / Accepted: 26 February 2019 / Published: 14 March 2019
(This article belongs to the Special Issue New Institutional Economics)
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Abstract

We examine the role of democracy shocks in the cross-country economic growth processes over a period of five decades since 1960. The recent uprisings that arose independently and spread across the Arab world form the main context of our investigation. We study if (i) a shock to democracy in one country triggers institutional reforms and growth upsurge in the neighbouring countries, and (ii) the magnitude and direction of response to democracy shocks are contingent upon income pathways of countries. To estimate the spillover effects of democracy shocks, we model and estimate growth interdependence among individual countries with similar democratic characteristics. To study the nature of responses of democracy shocks on cross-country growth processes, we build and estimate a Global Vector Autoregression (GVAR) model where we allow countries to be interdependent with regard to bilateral migration and geographical proximity. Using the GVAR model, we also stimulate a positive shock to democracy in Egypt—the most populous Arabic country—and study its impacts on institutional reforms and economic growth in the rest of the Arab World. We find that high and upper-middle income countries are immune to democracy shocks in Egypt, whereas the lower middle and low income countries are susceptible to another revolutionary wave. View Full-Text
Keywords: democracy shocks; Arab Spring; spatial growth interdependence; Global VAR; democracy; revolutionary wave democracy shocks; Arab Spring; spatial growth interdependence; Global VAR; democracy; revolutionary wave
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Abdel-Latif, H.; Mishra, T.; Staneva, A. Arab Countries between Winter and Spring: Where Democracy Shock Goes Next! Economies 2019, 7, 20.

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