Policy Uncertainty, Persistence and Growth

Joshua Aizenman; Nancy P. Marion

doi:10.1111/j.1467-9396.1993.tb00012.x

Policy Uncertainty, Persistence and Growth

Joshua Aizenman, Nancy P. Marion

Research output: Contribution to journal › Article › peer-review

155 Scopus citations

Abstract

This paper explores links between policy uncertainty and growth. Using an endogenous growth model in which domestic investment is characterized by irreversibilities and policy fluctuates between a high‐ and a low‐tax regime, it shows that the magnitude of policy fluctuation and the persistence of policy jointly determine the pattern of investment and growth. Cross‐section regressions confirm that for 46 developing countries over the 1970‐85 period, policy uncertainty is negatively correlated with both investment and growth. Policy persistence also plays an important role.

Original language	English
Pages (from-to)	145-163
Number of pages	19
Journal	Review of International Economics
Volume	1
Issue number	2
DOIs	https://doi.org/10.1111/j.1467-9396.1993.tb00012.x
State	Published - 1 Jan 1993
Externally published	Yes

ASJC Scopus subject areas

Geography, Planning and Development
Development

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10.1111/j.1467-9396.1993.tb00012.x

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abstract = "This paper explores links between policy uncertainty and growth. Using an endogenous growth model in which domestic investment is characterized by irreversibilities and policy fluctuates between a high‐ and a low‐tax regime, it shows that the magnitude of policy fluctuation and the persistence of policy jointly determine the pattern of investment and growth. Cross‐section regressions confirm that for 46 developing countries over the 1970‐85 period, policy uncertainty is negatively correlated with both investment and growth. Policy persistence also plays an important role.",

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AB - This paper explores links between policy uncertainty and growth. Using an endogenous growth model in which domestic investment is characterized by irreversibilities and policy fluctuates between a high‐ and a low‐tax regime, it shows that the magnitude of policy fluctuation and the persistence of policy jointly determine the pattern of investment and growth. Cross‐section regressions confirm that for 46 developing countries over the 1970‐85 period, policy uncertainty is negatively correlated with both investment and growth. Policy persistence also plays an important role.

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Policy Uncertainty, Persistence and Growth

Abstract

ASJC Scopus subject areas

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