Influence of political stability on labour productivity in post-socialist countries of the european union

Abstract

Economic performance of a specific country is, to a large extent, affected by political stability. The aim of this paper is to show that political stability has a significant impact on labour productivity measured by GDP per person employed. An analysis has been made using the random-effects model on three different measures for estimating political stability of a specific country: Political stability and absence of violence/terrorism, risk of coup, and state legitimacy. The sample consists of 11 post-socialist EU countries for the period between 2000 and 2017. The results indicate that political stability has a significant impact on labour productivity in post-socialist European countries. The robustness of results has been further conferment by alternative model specification. Given the fact that the majority of existing literature focuses on the causes of political instability and the measures of preventing them, this paper primarily points out the consequences of political instability on labour productivity and the economy.