Political institutions and their roles in economic growth and development

Document Type:Research Paper

Subject Area:Economics

Document 1

The quality of the political institutions was measured by the Governance Indicators from the World Bank. This research considered Rwanda and Burundi, countries located in Sub-Saharan Africa. Introduction Assessing the role played by the political institutions in the economic growth and development is no easy task. The deep-rooted and long-standing social and political challengers continue shaping the economic growth and development. Similar political institutions in two different nations affect their respective economic growth and development (Grier & Munger, 2006). Growth theories The economic development and growth is a complex occurrence. There are various theories on the growth although none of the theories is universally acknowledged as the best. In this research, three economic growth theories were used in constituting the framework. The theories were expected to help in explaining how the political institutions influenced the economic development and growth of a nation (Ahsan & Wang, 2015). Classical growth theory This is a general theory on growth and it is a combination of the different contributions from classical economists like David Ricardo, Robert Malthus, and Adam Smith. Although these classical economics differ in some aspects of their arguments, they agree at some points (Ahsan & Wang, 2015). The economists believed that every economy has its subsistence level. If the GDP goes above the subsistence level, the population increases. On the other hand, when the population is above the subsistence level, the GDP decreases because of the limited resources for the increasing population. This ion turn causes a decrease in the population (Ahsan & Wang, 2015). The Harrod-Domar model The Harrod-Domar growth theory emphasized the importance of investment and saving.

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The growth levels of a nation will depend on the national productivity of capital investments and saving levels (Arce, Miller, Patane & Polizzi, 2017). This will help in the generation of the income while augmenting the productivity of the capital investments by increasing capital stock. If the investment is positive, the real output and income will continue growing. To maintain the full employment equilibrium levels, the expansion of the real output and income is required at similar rate as productive capacities of the capital stock. The GDP expands, reaches peak, then contracts, reaches trough, then the cycle is repeated (Tan, 2015). Case of Burundi and Rwanda These two nations will better illustrate the effects of political institutions on the economic growth and development. The reason for selecting these two nations was based on the striking similarities that has led to varying economic situations between the two nations currently.

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Burundi and Rwanda are common African nations with a common border. The two nations are sharing common history, both being former Belgian and Germany colonies. This will also be reflected on the GDP of the country as well without making the citizens richer (Wacziarg, 2001). Figure 2: Rwanda and Burundi per capita in a thousand dollars Source: worldbank. org The present president of Rwanda Paul Kagame has been praised for his socioeconomic transformation of the nation into a modern state. Besides, Kagame has been accused of veering towards the authoritarian leadership that has resulted in the increased suppression of his political opponents and the press with disappearances and assassinations of his critics reported (Wacziarg, 2001). President has displayed traits that are distinct to autocratic leadership. According to researchers, without a well-functioning and respected political institutions in a nation, the citizens of the nation are presented with the incentives to embrace or invest more advanced technologies that would ensure economic growth and development (Acemoglu, Johnson & Robinson, 2005).

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Political institutions play an important role in assigning the available resources to where they are likely to have the most significant effect. Moreover, the political institutions decide who gets proceeds, profits and the right of control. Generally, good political institutions is a requirement for a healthy economic growth and development (Acemoglu, Johnson & Robinson, 2005). Some individuals or groups will gain more than others depending on the preexisting political conditions and resource allocation. Particularly, the longer the same individuals are in power in the low-income nations, the more the electoral system of that nation will be party-centered while the developing nations have a greater district magnitude and more pluralitarian the electoral system (Zouhaier & KEFI, 2012). The political federalism and polarization will help the low-income nations to achieve better and higher economic performance and development.

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Additionally, the variables of the political institutions vary with different democracies and autocracies. In the democratic regimes, longer political power will be held by a specific political leader (Hoppit, 2017). This will give a greater economic development and growth. This research used a longitudinal research design in which the selected sample was examined and re-examined. There two types of longitudinal research design: panel study and cohort study. This research used the panel study type of longitudinal research design. The advantage of the panel study is that it enables the researcher to understand how the chosen sample is influenced with time. However, the problem with the panel study are related to its nature. The difference was that they involved different IQ variables. Basic regression did not contain any variable whereas the other six regressions were similar to the basic variable except that the other six variables had included their respective IQ variable.

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Various regressions were performed but since the only difference was the IQ variable, the results from the various regressions were found to be similar. The regression results were presented in a table and the standard deviations were given in parenthesizes. The coefficients of every regression is given in the vertical columns and each regression was given a different number. The regression demonstrated that that improvements in the CoC variables was related to the increase in the GGPC. This was supported by the observation that corruption lowers the economic growth and development of a nation (Romer, 1994). Conclusion In conclusion, the findings from the study established that the political institutions have effects on the economic development and growth of a nation. The changes in the quality of the political institutions were used as proxies in measuring the quality of political leadership.

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Furthermore, the quality of leadership was operationalized by the Governance indicators of the World Bank. Tan, C. M.  Identity in the Political Economy of Institutions: Taxation, Group Conflict and the Perception of Democracy (Doctoral dissertation, ESSEC Business School (France)). Dal Bó, P. Experimental evidence on the workings of democratic institutions. Munger, M. C. On democracy, regime duration, and economic growth.  Unpublished paper, Duke University. Zouhaier, H. Arce, M. Miller, R. E. Patane, C. F. metu. edu. tr/upload/12609606/index. pdf). Romer, P.

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