IMF Working Papers

State Capacity and Growth Regimes

By Patrick A. Imam, Jonathan R. W. Temple

January 17, 2025

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Format: Chicago

Patrick A. Imam, and Jonathan R. W. Temple "State Capacity and Growth Regimes", IMF Working Papers 2025, 014 (2025), accessed March 6, 2025, https://doi.org/10.5089/9798400296673.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Economic growth, Economic recession, Income, National accounts

Keywords: Autocracy, Democracy, East Asia, Economic growth, Economic recession, Growth regime, IMF working paper 2024/014, Income, Markov chain, Stagnation regime, State capacity, State Markov chain

Publication Details

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