Tuesday, April 14, 2015

ASEAN Politics 4: Institutions and Per Capita Wealth in the Region

During the Philippine Economic Society (PES) Conference last November 2014, among the papers presented was this one.


The paper wanted to ask, why are some countries richer than the others?
Its Objective was "To know whether differences in existing political institutions in the ASEAN member states explain the differences in Per Capita GDP growth of the said member states from period 1993-2012"

Scope covers ASEAN countries excluding Myanmar and Brunei due to insufficient data from 1993-2012. 

The model used by the paper.






Results and Discussion

ü  Variations in Political Institutions explain the variations in per capita GDP among ASEAN member states
ü  The larger the Government Expenditure (per capita), the larger the GDP per Capita Growth
ü  A parliamentary republic form of government has a positive relationship with per Capita GDP Growth
ü  Negative relationship between Years in office and per Capita GDP

ü  Total seats in legislature is positively related with per Capita GDP
ü  The positive relationship between a parliamentary republic form of government and per capita GDP can be observed in Singapore

Conclusion

      Variations in political institutions across ASEAN member states explain the variation in per capita income of the said countries.
      Furthermore, this adds to the existing argument that political institutions do matter for development of countries across the globe.

Limitations of the Study

      Although the study has shown intuitive results, it can still further be improved through adding more variables to represent the political institutions of countries.
      The database used by this study offers a large pool of variables but the study only selected a few range of variables.
      Also, since the available data on GDP per capita (PPP 2011 constant prices) are only from 1993-2012, it limited the author to a 20-year time period which had not fully covered the shifts in the systems of government of the countries included in this study.

      Lastly, although the study aims to speak the results for the whole ASEAN, due to limited data available for Myanmar and Brunei Darussalam, they were not included in the study.
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My Discussions:

1. Aside from having a monarchy, Cambodia and Malaysia are also parliamentary and  it was not pointed out in the paper. The result, "parliamentary has a positive relationship with per Capita GDP Growth" can be suspect. 

2. The model is different compared to the approach used by the Fraser Institute in developing the Economic Freedom of the World (EFW) annual report, or Heritage Foundation's Economic Freedom Index (EFI) annual report, WEF's World Competitiveness Report (WCR) and other annual reports that plot economic and political freedom with economic outcomes like size of GDP, absolute and per capita.

3. For the EFW and EFI annual reports for instance, there are strong values and elaborate discussions given to rule of law -- like independence of the judiciary, protection of private property rights, enforcement of contracts, and so on. Here, there is zero mention of rule of law.

4. Nonetheless, it is a good attempt at exploring other possible explanations why some (ASEAN) countries are richer than others. 
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See also:

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