POSC 182 Lecture 16 2010

POSC 182 Lecture 16 2010 - POSC 182: Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 3: Policy Tools and Divergent Economic Philosophies Lecture 16: Business Cycles and Economic Philosophies February 10, 2010
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Evidence: Economic growth and political regime type There is a lot of variation in development in authoritarian governments Przeworski, et al (2000) find: There’s no tradeoff between democracy and development in terms of growth On average, democracies perform just as well as authoritarian governments Poor countries implement the same economic policies regardless of whether they are democracies or dictatorships Similar investment rates, etc.
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Evidence (continued) In rich countries, dictatorships and democracies grow at the same rate, but for different reasons: Rich dictatorships repress labor and grow through capital investment. Rich democracies pay labor more and grow through innovation. Democracies are fragile in poor countries and often revert to dictatorships Political instability negatively affects the economies of dictatorships, but not democracies
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Real GDP per Capita in the US Real GDP per Capita = Inflation adjusted average incomes
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Real GDP and Recessions
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Real GDP Growth and Recessions
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Unemployment and Recessions Unemployment goes up during recessions During recoveries, unemployment goes down, but usually lags GDP growth
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The Business Cycle Expansion (Booms) Income (GDP) growth Low unemployment rate Unemployment=people in the labor force that want a job but can’t find one.
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POSC 182 Lecture 16 2010 - POSC 182: Politics and Economic...

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