The relationship between political stability, fixed capital, employment, and economic growth: An analysis on MENA countries

As the growth theories before 1980 fell short in explaining the developmental differences in countries and could not provide a solution to the problems of underdeveloped countries, a necessity for new growth models emerged. In connection to the exogenous nature of technology, the perception that all countries can achieve economic growth depending on capital stock and employment volume was in time replaced by the effectiveness of institutional and social factors in this process, and it was seen that other factors rather than economic factors would be influential in terms of achieving economic growth. In the scope of institutional factors, the political regimes of countries were aimed to be analyzed, and accordingly, strong institutional structures were associated with democracy. Thus, it may be stated that, while democratic regimes are dominant in developed societies, antidemocratic regimes are encountered in developing societies. In this context, the type of the political regime is considered to be the main variable for economic growth. As the type of the political regime was inadequate in completely explaining economic growth, the concept of political stability started to be considered in the literature (Telatar, 2003:74-75). The concept of political stability is important in terms of determination of economic policies in a country for the long-term rather than the short-term and for rational decisions by managers in the private sector. Moreover, political instability may lead to property issues by bringing about weaknesses in the legal system. This situation may affect.