Analyzing the Effect of Populist Policies on the Economic Growth by Synthetic Control Method and Panel Data (Selected Petro-Producing Countries)

Document Type : Research Paper

Authors

Department of Economics, Faculty of Administrative Sciences and Economics, Isfahan University, Isfahan, Iran.

Abstract

The Experience shows the irresponsible, demagogic, unstudied, and unscientific policies of populists may satisfy and calm the masses in the short term, but in the long term, have imposed irreparable complications and costs on the sick economy of developing countries. Unemployment, inflation, budget deficit, and recession are among these costs. In some cases, the high natural resource incomes (especially petroleum) gives the populists the possibility of policy making without limits. The phenomena is known as petro-populism. In this paper, we analyze the populist policies in three petro-producing countries, Iran, Russia and Ecuador between 2012 and 2016. For this, using the synthetic control method, we simulated economic growth of each country since starting the populist rule. The results show that in Iran during Ahmadinejad presidency and in Russia during Vladimir Putin presidency, real and simulated economic growth have a significant gap and difference. However, for Ecuador during Rafael Cora presidency, real and simulated economic growth do not have substantial differences. In addition, to investigate the hypothesis of a populist cane economy in the three countries, the panel data method was used. The results confirmed the negative effect of populist policies on the economic growth of these countries (populist cane economy).

Keywords

Main Subjects

References

Abadie, A., Diamond, A., Hainmueller, J., & Diamond, A. (2010). Synthetic Control Method for Comparative Case Studies. Journal of the American Statistical Association, 105, 493-505.
Abadie, A., & Gaddeazabal, J. (2003). The Economic Costs of Conflict. The American Economic Review, 93(1), 1-12.
Acemoglu, D., Egorov, G., & Sonin, K. (2001). A Political Theory of Populism. Working Paper, 17306, Retrieved from www.nber.org.
Alizadeh, P. (2014). Iran and the Global Economy. London: Routledge.
Ball, C., Freytag, A., & Kautz, M. (2019). Populism-What's Next? A First Look at Populist Walking-Stick Economies. CESifo Working Paper, 7914.
Bittencourt, M. (2009). Polarization, Populism and Hyperinflation. University of Pretoria. Working Paper Series, 23278, Retrieved from www.nber.org.
Bresser-Pereira, L. C. (1993). Economic Reforms and Economic Growth. Cambridge: Cambridge University Press.
Pereira, L. B., & Dall’Acqua, F. (1991). Economic Populism versus Keynes: Reinterpreting Budget Deficit in Latin America. Journal of Post Keynesian Economics, 14(1), 29-38.
Cortés, R. O. (2010). The Danger of Populism. Macroeconomic Populism in Latin America: Is Colombia the Exception? Prolegómenos Derechos Y Valores, 13(26), 99-122.
Dornbusch, R., & Edwards, S. (1990). Macroeconomic Populism. Journal of Development Economics, 32(2), 247-277.
Edwards, S., & Dornbusch, R. (1991). Macroeconomic Populism in Latin America. National Bureau of Economic Research, Retrieved from https://www.nber.org/system/files/chapters/c8295/c8295.pdf.
Edwards, S. (2019). On Latin American Populism and Its Echoes around the World. Journal of Economic Perspectives, 33(4), 76-99.
Farzanegan, M. R. (2009). Macroeconomics of Populism in Iran. MPRA Paper, 15546.
Funke, M., Schularick, M., & Trebesch, C. (2023). Populist Leaders and the Economy. American Economic Review, 113(12), 3249-3288.
Frisell, L. (2004). Populism. NBER Working Paper, 166.
Grier, K., & Maynard, N. (2016). The Economic Consequences of Hugo Chavez: A Synthetic Control Analysis. Journal of Economic Behavior and Organization, 125, 1-21.
Gunning, P. (2006). Understanding Democracy: An Introduction to Public Choice. Nomad Press, 130, 249-250.
Guiso, L., Herrera, H., Morelli, M., & Sonno, T. (2017). Demand and Supply of Populism. Retrieved from www.NBER.com.
Harris, R., & Sollis, R. (2003). Applied Time Series Modelling and Forecasting. New York: Wiley.
Hawkins, K. A., Aguilar, R., Silva, B. C., Jenne, E. K., Kocijan, B., & Kaltwasser, C. R. (2019). Measuring Populist Discourse: The Global Populism Database. EPSA Annual Conference, Retrieved from https://populism.byu.edu/0000017d-bf5d-d270-a1fd-ff5fcf750001/global-populism-database-paper-pdf.
Kalteasser, C. (2019). Populism and the Economy. Retrieved from https://library.fes.de/pdf-files/iez/15244.pdf.
Karl, T. (1997). The Paradox of Plenty. California: University of California Press.
Krueger, A. O. (1974). The Political Economy of Rent-seeking. American Economic Review, 64, 291-303.
Matsen, E., Natvik, G. J., & Torvik, R. (2016). Petro Populism. Journal of Development Economics, 118, 1-12.
McClelland, R., & Mucciolo, L. (2017). What is the Synthetic Control Method? LEQS Paper, 112, 1-44.
Moeeni, S., Sharifi, A., Mozafari Shamsi, H., & Mohammadi, V. (2021). The Impact of Iran Oil Sanctions on the Exchange Rates. Iranian Economic Review, 25(3), 397-417.
Mudde, C., & Kaltwasser, C. (2017). Populism. New York: Oxford University Press.
Muller, J. W. (2016). What is Populism? Pennsylvania: University of Pennsylvania Press.
Ocampo, E. (2015). Commodity Price Booms and Populist Cycles. Retrieved from www.cema.edu.ar.
Pesaran, H. (2015). Time Series and Panel Data Econometrics. London: Oxford University Press.
Sachs, J. (1989). Social Conflict and Populism in Latin America. Working Paper, 2897.
Seghezza, E., & Pittaluga, G. (2018). Resource Rents and Populism in Resource-dependent Economies. European Journal of Political Economy, 54, 83-88.
Taggart, P. (2000). Populism. Milton Keynes: Open University Press.

Files

History

  • Receive Date: 08 September 2024
  • Revise Date: 25 November 2024
  • Accept Date: 04 May 2025

Share

How to cite

Statistics