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Abstract
Do all coups d’état carry the same economic cost? Using a first-event-only local projection on the Bjørnskov–Rode regime panel of 180 countries from 1960 to 2022, we estimate the response of total factor productivity to coups classified by the institutional transition each one produces. The impact-year productivity contraction is 4.2 percent in coups that displace a sitting democracy and statistically negligible in failed coups and coups that leave the regime unchanged, with the pairwise contrast rejecting equality at the 5 percent level. The estimate survives country jackknife, leave-one-region-out, alternative regime-classification timing, and a wild cluster bootstrap. An option-value adoption framework organizes the asymmetry, and a two-block structural estimation matches its qualitative predictions. The economic cost of political instability concentrates in the coups that dismantle democratic institutions, so the productivity stakes of instability lie in protecting democratic survival.
Keywords
Coups d’état, Institutional Change, Local Projections, Total Factor Productivity, Democracy, Political Instability
Citation
Chávez Padilla, Carlos César. 2024. “The Macroeconomic Consequences of Political Instability.” Working paper.