The Effect of Globalization and Political Party on Economic Growth

Abstract

The aim of this paper is to explore the role of globalization (the overall level as well as its three dimensions of economic, social, and political integration) in promoting economic growth and examine if the incumbent political party influences the relation between the two variables. We attempt to investigate the evidence of long-run equilibrium in terms of the relationship between globalization and economic growth in the period 1990-2006 while also considering the influences of the incumbent political party. In this paper we thus divide Europe into two groups based on political regime characteristics, using ten former communist countries (FCCs) and eighteen Organization for Economic Cooperation and Development (OECD) members as the study samples. The results of our empirical test confirm our expectations that globalization contributes to economic growth, but it is also sensitive to specific institutional factors, like an incumbent political party. Globalization has a larger impact on real gross domestic product per capita in FCCs than in OECD countries. Although the FCCs and OECD countries are in geographic proximity, the difference in their level of economic development is very large.