Institutions, Political Regimes and Economic Growth: Comparative Evidence for Latin America

Abstract

This article empirically analyzes the effect of political and economic institutions on economic growth in Latin American countries that experienced civil-military regimes lasting more than ten years, from 1960 to 2018. The central hypothesis is that the impact of institutions on the growth rate varies significantly between authoritarian and democratic regimes, being more robust in democratic contexts characterized by inclusive institutions. The empirical strategy is based on the System-GMM estimator, which is suitable for dealing with the endogeneity of institutional variables. The results indicate that economic institutions have a positive and statistically robust effect on growth, even under authoritarian regimes. This effect is significantly amplified in democratic periods. Political institutions have more fragile and specification-sensitive impacts, with positive effects emerging only over longer time horizons. We conclude that solid economic institutions are the main driver of growth in Latin America, but their ability to generate sustained and inclusive trajectories depends on interaction with democratic political arrangements that ensure predictability and institutional stability.