State Capacity and Growth Regimes

Patrick Imam and Jonathan Temple

No 2025/014, IMF Working Papers from International Monetary Fund

Abstract: Can high levels of state capacity protect countries from slow growth and deepening output collapses? Using data for 108 developing countries, we classify five-year periods using a two- dimensional state space based on growth regimes and levels of state capacity. We model transitions between them using a finite state Markov chain, and then extend this to take political institutions into account. We find that high state capacity helps to sustain growth and limit output collapses, but these effects are sometimes less striking than the benefits of democracy.

Keywords: Economic growth; state capacity; autocracy; democracy; growth regime; IMF working paper 2024/014; state Markov chain; Markov chain; stagnation regime; Income; Economic recession; East Asia (search for similar items in EconPapers)
Pages: 34
Date: 2025-01-17
New Economics Papers: this item is included in nep-dev and nep-gro
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