We use the ratio of growth in global military expenditures to gross domestic product (GDP) to capture ex ante expectations of political instability and explore the relation between this measure and returns. In a standard global asset pricing framework with 44 countries, this measure helps to explain cross-country return differences. Furthermore, emerging countries have greater exposure to inter...

This paper presents empirical evidence that links private investment to rate of return differential, risk aversion, and several types of political and economic risk. Estimating private investment equation for a panel of 25 developing countries over 21 years yields the following results: (i) socio-political instability characterized by nonviolent protests promotes private investment while violen...

Prior studies of civil conflict using panel studies or econometric models have provided inconsistent results. This paper presents the results of a new study, using case-control methods, to identify risk factors for political instability two years prior to event onset. The models we derive are surprisingly simple, and yet are able to identify states that will or will not experience political ins...

Relying on a simple endogenous growth model, this paper highlights a political instability effect as a potential explanation for why foreign aid is frequently ineffective with respect to economic performance. In the present framework, the role of the state is to fund institutions allowing for ongoing technology adoption and hence long-run growth. However, providing a self-interested government ...

Article history: Received 14 November 2014 Received in revised form 20 May 2015 Accepted 21 May 2015 Available online 29 May 2015 This paper investigates the relationship between political instability and labour market institutions. We develop a theoretical model in which political instability creates incentives for a government to introduce labour market regulation in the economy. The distorti...