Winners Never Quit, Quitters Never Grow
Although there is wide recognition of the negative consequences of policy volatility for countries' long-term economic growth, there is limited empirical work on this subject. One of the reasons is the difficulty of measuring policy volatility over long periods of time, especially in developing countries. This paper contributes to this literature by constructing a proxy for policy volatility that exploits the information content of the priorities conveyed in presidential speeches. The study creates a policy volatility measure using a Latent Dirichlet Allocation algorithm on a novel data set of 953 presidential speeches in 10 Latin American countries and Spain. The paper shows that the proxy for policy volatility is negatively correlated with long-term growth over 1940-2010. The results are robust to a large set of changes in the construction of the proxy for policy volatility.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-01
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| Subjects: | POLICY STABILITY, ECONOMIC GROWTH, VOLATILITY, TEXT MINING, PRESIDENTIAL SPEECHES, POLITICAL ECONOMY, PRIORITIES, DIRICHLET ALLOCATION ALGORITHM, |
| Online Access: | http://documents.worldbank.org/curated/en/634591516387264234/Winners-never-quit-quitters-never-grow-using-text-mining-to-measure-policy-volatility-and-its-link-with-long-term-growth-in-Latin-America https://hdl.handle.net/10986/29220 |
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| Summary: | Although there is wide recognition of
the negative consequences of policy volatility for
countries' long-term economic growth, there is limited
empirical work on this subject. One of the reasons is the
difficulty of measuring policy volatility over long periods
of time, especially in developing countries. This paper
contributes to this literature by constructing a proxy for
policy volatility that exploits the information content of
the priorities conveyed in presidential speeches. The study
creates a policy volatility measure using a Latent Dirichlet
Allocation algorithm on a novel data set of 953 presidential
speeches in 10 Latin American countries and Spain. The paper
shows that the proxy for policy volatility is negatively
correlated with long-term growth over 1940-2010. The results
are robust to a large set of changes in the construction of
the proxy for policy volatility. |
|---|