On the measurement of political instability and its impact on economic growth

We examine the relationship between political instability and economic growth. Using an exploratory factor analysis we identify four dimensions of political instability: (1) mass civil protest, (2) politically motivated aggression, (3) instability within the political regime and (4) instability of the political regime. We show that individual political instability indicators are generally poor proxies for the underlying dimensions of political instability. Our panel estimates for a sample of 98 countries in the period 1984-2003 indicate that the various dimensions of political instability have different effects on economic growth.