Poverty, the coup trap...

8/7/2019 Poverty, the coup trap...

1/34

Trustees of Princeton University

Poverty, The Coup Trap, and the Seizure of Executive PowerAuthor(s): John B. Londregan and Keith T. PooleSource: World Politics, Vol. 42, No. 2 (Jan., 1990), pp. 151-183Published by: Cambridge University PressStable URL: http://www.jstor.org/stable/2010462 .

Accessed: 21/03/2011 22:56

Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless

you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you

may use content in the JSTOR archive only for your personal, non-commercial use.

Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at .http://www.jstor.org/action/showPublisher?publisherCode=cup. .

Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed

page of such transmission.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of

content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms

of scholarship. For more information about JSTOR, please contact [email protected].

Cambridge University Press and Trustees of Princeton University are collaborating with JSTOR to digitize,

preserve and extend access to World Politics.

http://www.jstor.org
http://www.jstor.org/action/showPublisher?publisherCode=cuphttp://www.jstor.org/stable/2010462?origin=JSTOR-pdfhttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/action/showPublisher?publisherCode=cuphttp://www.jstor.org/action/showPublisher?publisherCode=cuphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/stable/2010462?origin=JSTOR-pdfhttp://www.jstor.org/action/showPublisher?publisherCode=cup


2/34

POVERTY, THE COUP TRAP, ANDTHE SEIZURE OF EXECUTIVEPOWER

By JOHN B. LONDREGAN and KEITH T. POOLE*

I. INTRODUCTIONT HE transferofexecutivepowerthroughtheuseorthreatof force,the coup d'etat,has becomecommonplace.As is thecase with snow-flakesand sunsets,no two such transfersare exactlyalike. Various stud-ies have described the nuances and idiosyncrasiesof particularcoups ingreat detail.' Underlyingthe interestingparticularsof colonels over-throwinggeneralsand ofupwardlymobile drillsergeantstakingup res-idence in presidentialpalaces, however,thereis a common denominatoramong coups: poverty.We agreewith Luttwak and with Finer thateconomicbackwardnessis close to beinga necessaryconditionforcoups.2Coups are almost non-existentin developed countries.To assessthe interrelationshipbetweeneconomicprivation(as measuredby per capita income)and theincidenceofcoups d'etat,we have analyzed politicaland economic data fromI2Icountriesbetween 1950 and i982. We find a pronouncedinverserela-tionshipbetweencoups and income: coups are 21 times more likelytooccuramongthepoorestcountriesin oursamplethanamongthe wealth-iest.To carryout our study,we constructeda model thatenables us toassesstheseparateinfluencesof incomegrowth,the level ofincome,anda country'spast historyofcoups,as well as theinterdependenceofcoupsand income growth.Because the data are organized by countryovertime,we are able to employtime-seriesanalysisto discriminatebetween

* The helpfulcommentsofAlbertoAlesina,JimAlt, Howard Rosenthal,and participantsin seminarsat Carnegie MellonUniversity,theUniversityof WesternOntario,and the Na-tional Bureau of Economic Researchare gratefullyacknowledged. We also gratefullyac-knowledgethefinancialsupportofJohnLondregan'sworkbyBP America.I See, forexample,Henry Bienen,ed., The MilitaryIntervenes:Case Studiesin PoliticalDevelopment(New York: Russell Sage Foundation,i968); and Samuel Decalo, CoupsandArmyRule inAfrica(New Haven: Yale UniversityPress,I976).2 Edward Luttwak,Coup d'Etat: A PracticalHandbook(New York:Knopf,i969); SamuelE. Finer,The Man onHorseback(London: Pall Mall, i962).


3/34

152 WORLD POLITICSthelong-and short-termeffectsofcoupsd'etat.Zuk and Thompsonexploiteda similardatastructuretoanalyzepostcoupmilitaryspendingovertime.3By contrast,mostpreviousworkiscross-sectionalinnature.4

Huntingtonarguedthat"modernitybreedsstability,butmoderniza-tionbreedsinstability,"5whileOlsoncontendedmorenarrowlythateco-nomicgrowthis destabilizing.6Needlerasserts,however,that"a suc-cessfulcoup or revoltis less likelywhen economicconditionsareimproving."7Ourmodelenablesus tosimultaneouslyassesstheimpactoftherateofeconomicgrowthand thelevelofpercapitaincomeononeformofpoliticalinstability:thecoupd'etat.We findthata highlevelofincomedramaticallyinhibitscoups;so does a high rate of economicgrowth,to theextentthatitexertsan influenceindependentofthelevelofincome.AccordingtoHuntington,"Themoremanwageswaragainst'hisancientenemies:poverty,disease,ignorance'themorehe wageswaragainsthimself."8Ifthatis true,thecoupd'etatisnotman'sweaponofchoice.Ourmodelalso indicatesthatthepoliticalaftereffectsof a successfulcouparesubstantial.A successfulcoupcontinuestoelevatethepropen-sityforyetanothercoup forupto sixyears.This findingcomportswithFiner'sassertionthatthe"politicalculture"of a countrysuffersseriouserosionin thewake ofa coup.9Once theice isbroken,morecoupsfol-low.'O And once the structuresof civilianauthorityand constitutionalproceduresaretorndown,manyyearsarerequiredtorebuildthem.Thiselevatedcoup propensityisconsistentwiththerecentfindingby BienenandVan De Walle thatAfricanleaderswhoacquirepowerbyextralegal

3Gary Zuk and William R. Thompson,"The Post-coupMilitarySpending Question:APooled Cross-SectionalTime Series Analysis,"AmericanPoliticalScienceReview76 (Marchi982), 60-74-4Robert W. Jackman,"PoliticiansinUniform:MilitaryGovernmentsand Social Changein theThird World,"AmericanPoliticalScienceReview70 (December I976), I078-97; Rose-maryO'Kane, "A ProbabilisticApproachto theCauses ofCoups d'Etat,"BritishJournalofPoliticalSciencei i (Julyi98i), 287-308; RosemaryO'Kane, "Towards an ExaminationoftheGeneralCauses of Coups d'Etat,"EuropeanJournalofPoliticalResearchi i (March i983), 27-44; Pat McGowan and Thomas H. Johnson,"AfricanMilitaryCoups d'Etat and Under-development:A QuantitativeHistorical Analysis,"Journalof ModernAfricanStudies22(December i984), 633-66; Thomas H. Johnson,Robert0. Slater,and Pat McGowan, "Ex-plainingAfricanMilitaryCoups d'Etat, i960-i982," AmericanPoliticalScienceReview78(Septemberi984), 622-40.5Samuel P. Huntington,PoliticalOrderinChangingSocieties(New Haven: Yale UniversityPress,I968),4 I .6MancurOlson, "Rapid Growthas a DestabilizingForce,"JournalofEconomicHistory23(December i963), 529-52.7Martin C. Needler,"PoliticalDevelopmentand MilitaryInterventionin Latin America,"AmericanPoliticalScienceReview 6o (Septemberi966), 6i6-26, at 6I7.

8 Huntington(fn.5), 4I.9Finer (fn.2).-0McGowan and Johnson(fn.4),639; O'Kane (fn.4, i983), 34.


4/34

POVERTY AND THE COUP TRAP 153means are more likelytobe ousted thantheirlegallyappointedcounter-parts,at leastduringthe firstyearsof theirrule."-Despite thedramaticeffectof economicperformanceon theprobabil-ityofcoups,thereverseisnottrue:a country'spast coup historyhas littlediscernibleeffecton its economy.We find no evidence thateither therecenthistoryofcoupsor the currentpropensityfora coup d'etatsignif-icantlyaffectthe growthrate.In sectionII, we describe the data used in thisanalysis.Section IIIprovides a preliminaryanalysisof the interrelationshipsamong coups,per capita income,and politicalinstability.In sectionIV we subjectthedata to a parametricanalysisthat accountsforthe jointendogeneityofcoups and economicgrowth.Concludingremarksappear in sectionV.

II. THE DATAOur political data are provided by The WorldHandbookofPoliticaland Social Indicators;12 the economic data were compiled by Summersand Heston.'3 The WorldHandbookprovidesannual political data for148 countriesduringtheperiod 1948-I982; Summersand Heston pro-

vide annual economic data for 130 countriesbetween 1950 and i985.Aftermatchingthe two data sets,we are leftwith annual observationsfor 121 countriesfrom1950 to I982. We do not includeyears prior to acountry'sindependence;thereforeourdata forsome countriesbegin af-ter 1950. (For example,our firstobservationfor Algeria is dated 1962.)The matched data set includes3,036 observations;each consistsofpolit-ical and economic informationfora given countryduring a particularyear.The political data include riots,elections,political executions,deathsfromdomesticpolitical violence,successfulirregulartransfersofexecu-tivepower (thatis,successfulcoups),and unsuccessfulattemptsat irreg-ular transfersof executivepower (failedcoups). The politicalvariableswere compiled for the WorldHandbookfrompublished sources such asthe New YorkTimesIndex and Keesing'sContemporaryArchives.Some of11HenryBienenand Nicolas Van De Walle, "Time and Power inAfrica,"AmericanPo-

liticalScienceReview83 (March i989), I9-34, at 26, 30.12This informationwas made available bytheInter-UniversityConsortiumforPoliticaland Social Research,AnnArbor,MI. The data fortheWorldHandbookofPoliticaland SocialIndicatorsIII, I948-i982 (New Haven: Yale UniversityPress,i983), wereoriginallycollectedby Charles Lewis Taylor.Neitherthe collectorof theoriginaldatanortheConsortiumbearanyresponsibilityfortheanalysesor interpretationspresentedhere.13RobertSummers and Alan Heston,"A New Set of InternationalComparisonsofRealProduct and Prices: Estimates for I30 Countries,I950-i985" The Reviewof Income andWealth34 (April i988), I-25-


5/34

154 WORLD POLITICSthesemeasuresofpoliticalunrestundoubtedlysufferfromseriousun-derreporting:theSouthAfricangovernmentdoesnotinvitethepresstohangingsof politicalprisoners.The data on irregulartransfers(coups)are quitereliable,however,as evencriticsoftheuse of theelitepressasa sourceofpoliticaleventsdataacknowledge.'4To measureincome,we use realgrossdomesticproduct(GDP) percapita.SummersandHestonprovidetwomeasuresofrealincome,oneusing"chainprices,"theotherreportingincomesin constanti980 prices.Comparisonsofrealincomeacrosstimeand betweendevelopedand de-velopingcountriesarehamperedbydifferencesin cultureand technol-ogy.'5Real GDP asmeasuredin i980 U.S. dollarshas theadvantageofexpressingall valuesof real incomein termsof a commonbase year:itis thereforethe measurewe haveadopted.The i980 measureofrealGDP makestheinter-country,inter-yearcomparisonsof real incomeeasiertointerpret;usingthe"chainprice"as a measureyieldsessentiallysimilarresults.Forbothmeasuresofrealincome,Summersand Hestoncomputesep-arate pricedeflatorsforconsumption,investment,and governmentspending.To calculaterealincomepercapita,theydividenominalGDPineachsectorbythesector-specificpriceindexandcombinetheresultingconstantdollarvalues.Theyassertthatthisapproachprovidesa morereliableindicatorofrealincomethencouldbe obtainedbyusinga singlepricedeflator.

III. PRELIMINARY DATA ANALYSISTable I reportsthemeansandstandarddeviationsofthepoliticalandeconomicvariablesthatformthebasisofouranalysis.This tableindi-catesthatriots,elections,anddeathsfromdomesticpoliticalviolencearecommonevents;each occursin about one-thirdof all country/years.Coups (whethersuccessfulornot)andpoliticalexecutionsarelesscom-mon; theyoccurin fewerthanone-tenthofthecountry/yearsin oursample.Themeanofrealgrossdomesticproductpercapitaisjustunder$3,000 measuredin i980 U.S. dollars,or about27 percentofU.S. per

capitaGDP fori980.Table 2 reportsthePearsoncorrelationcoefficientsbetweenpopula-tion,income,and six politicalvariables:riots,unsuccessfulcoup at-14Mort Rosenbloom,Coupsand Earthquakes:ReportingtheWorldforAmerica(New York:Harper& Row, 1979).15 A cogentdiscussionoftheseissuesin relationto the Summersand Hestondata is con-tainedin RobertE. Lucas, "On the MechanicsofEconomicDevelopment,"JournalofMon-etaryEconomics22 (Julyi988), 3-42,at 3-4.


6/34


7/34

TABLE 2CORRELATION COEFFICIENTS BETWEEN POPULATION, INCOME, AND

Per Capita Failed SuccessPopulation Incomea Riots Coups CoupsPopulation 1.000 - 0.008 0.348 - 0.042 - 0.029(0.015)b (0.037) (0.005) (0.006)Per capitaincome 1.000 0.029 - 0.068 - 0.090(0.018) (0.011) (0.007)Riots 1.000 0.103 0.066(0.041) (0.020Failedcoups 0.138c 1.000 0.183(0.040) (0.038Successfulcoups * * 0.094 0.194 1.000(0.020) (0.038)Elections 0.081 0.045 0.043(0.025) (0.016) (0.016Politicalexecutions * * 0.022 0.074 0.078(0.017) (0.031) (0.033Deathsfrom * * 0.008 0.026 0.018domesticpolitical (0.020) (0.035) (0.026violencea Standarderrorsare shownin parentheses.bThe entriesabove thediagonal are zero-orderPearsoncorrelationcoefficients.cThe entriesbelow thediagonal are second-orderPearsoncorrelationscontrollingforpercapitainco


8/34


9/34

158 WORLD POLITICSis not theonlyproblem;anotherone is theverydefinitionofthe term"failedcoup attempt."As Needlerputit,"The categoriesofcoupsthatwereaborted,suppressed,or abandonedmeltintoeachotherandintoahostofothernon-coupphenomenasoas todefyaccounting."'7The economicvariableshavea muchstrongereffectthanthepoliticalvariables.Forexample,amongthepoliticalvariables,unsuccessfulcoupshavethestrongestassociationwithsuccessfulcoups:theprobabilityofasuccessfulcoup,conditionalona failedcoupoccurringinthesameyear,is fourtimesthe unconditionalmeanprobability.The influenceof in-come on theprobabilityofa coupismuchmoredramatic:the condi-tionalprobabilityofa coupwherepercapitaGDP is inthehighestquin-tile of the sample (i.e., in excess of $4,805) is onlyone-fifteenthof theunconditionalprobability.The inverserelationshipbetweenincomeand thecoup propensityinTable 3 is a mirrorimageof thepositivecorrelationdescribedbyLipsetbetweenincomeanddemocraticstability.LipsetrelieduponGNP percapitain 1949, as calculatedbytheUN statisticaloffice.We reconstructhisanalysisusingSummersand Heston'sreal GDP measuresfor1950,the earliestyearforwhichtheyare available.Lipsetcalculatedmeanincomesforfourgroupsofcountries,classifiedbythedegreeto whichtheyenjoyeda democraticpoliticalculture.'8Usingthe countrieswithinLipset'sclassesforwhichSummersandHeston's data are available,we findthattheaverageincomesduring1950, as measured in constanti980 U.S. dollars,were: $4,284 for "Eu-ropeanand English-SpeakingStableDemocracies";$2,210 for"Euro-peanand English-SpeakingUnstableDemocraciesandDictatorships";$1,719 for"Latin AmericanUnstableDemocraciesandDictatorships";and$i,249 for"LatinAmericanStableDictatorships."ThemeansofallcategoriesexceptEuropeanand English-SpeakingStableDemocracies(whichisnearthetopofthefourthquintile)fallintothemiddlequintileofpercapitaincomeforoursample.This suggeststhatthelevelof in-comeatwhichtheincidenceofcoupsbeginstodeclineisaboutthesameas thatidentifiedby Lipsetas thelevelat which"stabledemocracy"emerges.

The two variablesthatare centralto theremainderof ouranalysis,coupsandpercapitaincomes,exhibitconsiderableinterregionalhetero-geneity.Region-specificmeansfortheannualcoup probability,thean-7Needler (fn.7), 6I7-

i8 SeymourMartinLipset, "Some Social Requisites of Democracy:Economic Develop-mentand PoliticalLegitimacy,"AmericanPoliticalScienceReview 53 (March I959), 69-I05,at 75-77.


10/34

POVERTY AND THE COUP TRAP 159nualgrowthrateofpercapitaincome,and thelevelofpercapitaincomeareshowninTable 4. SouthAmericahas thehighestrateofcoups,fol-lowed by Africa(thepoorestand slowest-growingregion).Europe/NorthAmerica(therichestregion),and Oceania have thelowestcouprates.These interregionalcomparisonsarebroadlyconsistentwiththenegativeassociationbetweenincomeand coupsindicatedin Table 3.However,thehighrateofcoupsinSouthAmericadoesnotseementirelyattributableto low incomeorslowgrowth:the countriesofAfricaarepoorerandhaveslowerratesofgrowth,butexperiencea lowerrateofcoups.

TABLE 4SELECTED STATISTICS BY REGION, I950

Fractionof AnnualObservations PerCapita PerCapitawithat least IncomeGrowth IncomeoneCoupd'Etat Rate (1980 U.S.$)SouthAmerica 12.7% 1.8% 2,157Africa 7.8% 1.3% 612CentralAmericaandtheCaribbean 6.6% 1.8% 1,678Asia 5.9% 2.9% 1,702Europeand NorthAmerica 1.4% 3.3% 4,826Oceania 1.0% 2.2% 3,311

The pronouncednegativeassociationbetweencoupsandhighincomeis consistentwiththefindingsofsomeauthorsthat-controllingforvar-ious politicalvariables-a weak economymakescoupsmorelikely.'9This leaves severalquestionsunanswered:Do coups cause pooreco-nomicperformance,ordoespooreconomicperformancecausecoups?What is theeffectofpoliticalinstability,in theformofcoupsd'etat,ontherateofeconomicgrowth,controllingforthelevelofeconomicattain-ment?WhatexplainsthehighrateofcoupsinSouthAmericadespitethatregion'srelativelyadvancedeconomicdevelopment?In sectionIV,we constructa parametricframeworkinwhichweassessthenatureanddegreeoffeedbackbetweencoupsandeconomicperformance.Thepara-metricapproachalsoenablesus todistinguishbetweentheeffectsof thelevelof incomeand the rateofincomegrowth,and toincorporatetheaftereffectsofpastcoupsintoouranalysis.19Jackman(fn. 4), iQ84; O'Kane (fn. 4, i983), 34; Johnson,Slater,and McGowan (fn.4),635; McGowan and Johnson(fn.4), 658.


11/34

160 WORLD POLITICSIV. PARAMETRIC ANALYSIS

We begin our analysisby constructinga probitmodel of coups. Thismodel reveals that povertyand a past historyof coups significantlyin-crease therisk thata coup willoccur. Rapid growthdoes not emergeasa source of coups: to the extentthatit mattersindependentlyof the levelof income,the rateof income growthis coup-inhibiting.The relationshipbetween coups and incomeraises thequestion:Doeslow incomecause coups,or is it theotherway around? To findthe an-swer,we employa simultaneous equations frameworkthat allows forthe joint endogeneityof coups and income. The model we have con-structedindicatesthatdisturbancestotheGDP growthequation are cor-relatedwith shocksto the coup equation. Unanticipatedlow growthisassociatedwithan elevated coup probability.It appears to be easier forthe militaryto seize powerwhen the currentgovernmentis doingbadlythan when it is doing well. The aftereffectsof a successfulcoup, how-ever, are felt for many years in the form of a heightened risk of yetfurthercoups.A. A MODEL OF COUPS

From a data-analyticpointofview, coupsare a discretephenomenon;there is no such thingas a "half a coup." To account for the all-or-nothingnatureof coups,we use a probitmodel to analyze theiroccur-rence. In thismodel, there is an underlyingpropensityto have a coupduringyeart in countryi. We denotethispropensityas z4' When zt' ispositive,at least one successfulcoup occurs;when it is negativeor zero,thereis no successfulcoup. We let sit denotethe indicatorvariableforasuccessfulcoup. If at least one successfulcoup occursduring yeart incountryi, sit = I; otherwise8it = o.The model is completed by specifyingtheprocessthatgenerateszt,Here we assume thatitis of the form:

Z'= X;,0 XTit (I)where the disturbancetermisnormallydistributedwith zero mean andvariancea,,. In latentvariablemodels ofthistype,one can identifythe0parameteronly up toa factorofproportionality,namelyi/C,,.We followtheusual custombyimposingtheconvenientbutarbitrarynormalizationC,, = I. The vectorx,1consistsofvariables thatare predeterminedwithrespectto z4'during yeart in countryi.20These variablesmay include

20 RobertF. Engle, David F. Hendry,and Jean-FrancoisRichard,"Exogeneity,"Econo-metrica5I (March i983), 277-304,at 280.


12/34

POVERTY AND THE COUP TRAP 161time-varyingregressors,such as pastvalues of per capita GDP, as wellas fixedregressors,suchas variablesthatindicategeographicregion.We beginwitha distributedlag model in which thelatentcoup pro-pensitydepends solelyupon the occurrenceofpreviouscoups:

TZ4' = so + X oscit-s nit (2)S= Iwherecitdenotes thenumberofcoups thatactuallyoccurredin countryi during year t. Equation (2) specifiesthat thepropensityfora coup tooccurduringthe currentyeardepends upon thenumberofcoups in eachof theprecedingT years.In thismodel,theeffectsof a past coup dependon the time thathas elapsed since its occurrence.The parameterOsrep-resentsthe impact of a coup thatoccurreds yearsago on the currentpropensityfora coup. The errorterm in equation (2) is seriallyuncor-relatedand homoscedastic.In principle,we would like to make T as large as possibleand placeno additional restrictionson the0, terms.As a practicalmatter,we haveonly3,036 observations,with no morethan33 consecutiveannual obser-vationsforany givencountry.It is thereforeimpossibleforus toestimatetheimpactofcoupsthatliemore thanthirty-twoyearsinthepast.More-over,we observecompletethirty-three-yearhistoriesforonly 48 of theI i9 countriesin our data set. The median countrycontributes24 obser-vations.Thus, ifwe required completeT-yearhistoriestoestimateequa-tion (2), we would have to discardmost of our data ifT were large.Forinstance,only 4I4 of our 3,036 observationsinclude completetwenty-four-yearcoup histories;so,forT = 24, we could use only I4 percentofour data. An alternativeto thisapproachwould be to impose hypothe-sized values for thepre-samplecoup histories.We could setcit= o forall pre-samplevalues of t. Althoughthisapproach seems sensible fornewlyindependentcountries,it is less appealingforcountriesthat wereindependentfor a long time priorto I948, such as Argentina,whichgained independencein i8i6, or Bolivia,which has been independentsince i825.To operationalizethemodel,we setT = I3. Half ofour observations(1,524 data points)contain complete thirteen-yearhistories.Our choiceofT enables us to examinepossibletimedependencein thecoup processover more than a decade while stillleaving us with a relativelylargenumber of observations.Column one of Table 5 reportstheparameterestimatesforequation (2). We see that theestimatedimpact coefficientsare,with one exception(thefourthlag), positiveand significantup to sixyearsinto the past; moreover,withone exception (theninthlag), theyare individuallyinsignificantbeyondsixyears.


13/34

TABLE 5THE EFFECT OF PAST COUPS AND RECENT INDEPENDENCE

ON THE LIKELIHOOD OF A CURRENT COUpaEquation(4)

Equation(2) Equation(3) Equation(4) (revised)Intercept -1.926 -1.909 0.825 -1.926(0.086) (0.084) (4.033) (0.100)CoupHistoryRecentcoups 0.261 0.263 0.262Mostrecent6 years (0.058) (0.059) (0.059)Distantcoups 0.128 0.132 0.125Morethan6 yearspast (0.055) (0.055) (0.055)Coups lagged1year 0.406(0.145)Coupslagged2 years 0.365(0.160)Coupslagged3 years 0.375(0.138)Coupslagged4years - 0.351(0.302)Coupslagged5years 0.316(0.137)

Coupslagged6 years 0.289(0.154)Coupslagged7years 0.179(0.181)Coupslagged8years 0.043(0.129)Coups lagged9 years 0.458(0.136)Coups lagged10years 0.141(0.159)Coupslagged11years - 0.060(0.201)Coupslagged12years - 0.277(0.276)Coups lagged13years 0.274(0.201)RecentIndependenceAge (since -0.016independence) (0.138)Age2 -0.404(0.598)Age3 0.020(0.028)Post-1950independence - 0.0003 0.050(0.0004) (0.117)Log of thelikelihoodfunction -259.007 -268.332 - 267.008 -268.245a Standarderrorsareshowninparentheses.


14/34

POVERTY AND THE COUP TRAP 163A more parsimoniousrepresentationofthecoup data is provided bymodel (3), in which the error termis seriallyuncorrelatedand homo-scedastic:

L TZit no + YI XCi 5 itS aiS= I s=L+ I

In this model,all recentcoups (thosethatoccurredwithinthepastLyears)have a commoneffect,measuredbyyl on thecoup propensity;y2measuresthe commoneffectofcoups in the moredistantpast(thosethatoccurredbetweenL + i and T yearsago). Because theestimatedindivid-ual impact coefficientsbecome individuallyinsignificantaftersix lags,we setL = 6,and estimatemodel (3). The resultingparameterestimatesare reportedin column twoof Table 5.A model inwhich the aftereffectsof a coup decaygeometricallyis alsoestimated:Tzt 0 +I IX3XCit-S+ 'litS=I

Accordingto thismodel,a coup occurrings + i yearsin thepasthas I3stimes the impactof a coup occurringlastyear.The estimated13is o.89,indicatingthatthe aftereffectof coups wears offgeometricallywith ahalf-lifeof about sixyears.The log ofthe likelihood functionsis essen-tiallythe same forboth model (3) and thismodel.Model (3) provides a parsimonious representationof the coup datawhilepreservingthe overallfitof themodel.However, thechangein thelog of the likelihood function(whichfallsby only 9.33 as a resultof i iindependentrestrictions)cannot formthe basis of a classicalhypothesistest because the parameterconsolidationembodied in model (3) is in-formedby previousexaminationof the data.A key implicationofmodel (3) is that a past historyof coups makesfurthercoups more likely.The impactcoefficientsforrecentcoups,y,and forcoups in the more distantpast,y2, are significantand positive;thoughrecentcoups have a greaterimpacton thecurrentpropensitytoa coup.

It has been suggestedthat recentindependenceinhibitscoups.21 Totest the hypothesisthatnewly independentcountriesare at a reducedriskof a coup,we extend thespecificationofequation (3) by incorporat-ing the amount of time elapsed since independenceinto equation (4).Because theeffectof timesinceindependencemaybe nonlinear,we add21O'Kane (fn.4, i98i), 289-96.


15/34


16/34

POVERTY AND THE COUP TRAP 165sity;K2measures the aftereffectsof coups in themore distantpast; K3measurestheimpactof thepreviousperiod'slevel ofper capita income;and X4measuresthe effectsof the lastperiod'sgrowth.The remainingparametersmeasureregionaleffects:K5measuresthe effectof locationinAfrica;K6and K7measure theeffectsof locationinEurope/NorthAmer-ica and in South America,respectively;K8and K9measure theeffectsoflocationin the Caribbean/CentralAmerica and in Oceania respectively.The Asia effectis subsumed into theinterceptterm,K..To estimatemodel (5), we use all 2,798 observationsforwhichcom-plete two-yearhistoriesare available. The resultingestimatesappear incolumn one of Table 6. The effectof the last period's income as mea-suredbyK3is consistentwith theresultsin theprecedingsection;incomehas a largeand statisticallysignificantcoup-inhibitingeffect.All else be-ing equal, fora countryat the sample mean, a doublingof per capitaincome leads to a 37.4 percentreductionin the annual probabilityof acoup, from0.06I5 to 0.0385. The average probabilityof a coup in oursubsampleof 2,798 observationsfor whichtwo-yearhistoriesare avail-able is 0.06I5, slightlyhigherthanthe 0.0507 mean probabilityfor theentiresample of3,036.The estimatedparametersforthismodel also include some surprises.For example, the estimatedcoefficientof the last period'sgrowth rate,K4,is impreciselyestimated and insignificant.Several of the region-specificcoefficientsare also insignificant.Notably, the coefficientesti-mated forAfrica differsinsignificantlyfromzero. Africancountriesaremore susceptibleto coups because theyare poor,not because they areAfrican.22The only regional effectthat is significantis that forSouthAmerica.Many South Americancountriesbecame independentwell beforeI950,however,and are notoriousforhaving sufferedcoups duringthe I930Sand I940S.23Thus, the "South America effect"may really be the after-effectof coups occurringbefore I950. An adequate resolutionof thisquestion will requirecollectionof pre-I950 coup data forthe countriesthat were independentat thebeginningof our sampleperiod.As indicated by the significantand positive coefficientfor recentcoups,a pasthistoryof successfulcoups putsa countryat greaterrisk ofyet furthercoups. This past-coupeffect,however,appears to wear offwith the passage of time. This comportswith the recentfinding ofBienen and Van De Walle thatAfricanleaders who acquire power by

22 McGowan and Johnson(fn.4), 652-60.23 Cf. thediscussionin Finer (fn.2), I54-57,inwhichhe describesthespecialized SpanishvocabularydevelopedinLatin America forcoupsd'etat.


17/34


18/34

POVERTY AND THE COUP TRAP 167insignificantcoefficientinTable 6 forcoups thatoccurredmore than sixyearsin the past.Our model of coups is constructed"fromtheground up," beginningwith a simple autoregressivemodel of coups, and then adding economicand regionalvariables. This methodraisesthe concern thatour resultsmighthave been differentif we had firstestimated model (5), whichincludes regionaland economic variables,and thentested (a) O'Kane'srecentindependencehypothesis;and (b) our restrictionson the lag struc-tureof coups.For example,the resultsofthe testofO'Kane's hypothesiscould differdue to correlationbetween omittedeconomic and regionalvariables,on the one hand,and age sinceindependence,on the other.

To guard againstthepossibilitythatour resultsmightbe an artifactof bias created by omittedvariables,we reran our testsincludingtheeconomicand regionalvariables.Even thoughthisproceduredoes notconstitutean independentsetof tests,it is reassuringto know that theresultsdid not change. The alternativeapproach did not uncover evi-dence of any "new independence" effect;nor did therestrictionof thelag structureforcoups to "recentcoups) and ''coups in themore distantpast" lead to significanterosionofthegoodnessoffit.To be specific,thelikelihood ratio testof the null hypothesesthat the "new independenceeffect"is constantover time(zero coefficientsforai1,a4,and a3t),and thatthereis no "new independenceeffect"(a coefficientof zero foraj) were6.073 and 0.487 respectively,generatingp-valuesof 0.I94 and 0.485,whichindicateacceptanceat all conventionallevels.B. A MODEL OF INCOME

The dependence of coups on income raises the importantquestionwhetherlow income can be said to cause coups or whethercoups causepooreconomicgrowth.The parameterestimatesincolumn one ofTable6 certainlyindicate that income "Granger-causes"CoUpS,26 in the sensethat includingboth past income and a country'spast historyof coupsamong the explanatoryvariables improvesthe fitobtained when onlylagged coups are includedin the model. In order to learnaboutthe con-temporaneouseffectofcoups on growthand ofgrowthon coups,how-ever, we must constructa model thataccountsfor jointendogeneityofeconomic growthand coups d'etat.A necessaryfirststep toward such a model is the constructionof asimplemodel ofper capitaGDP. Since itis knownthatoutputisstronglycorrelatedovertime,we fitan autoregressivemodel ofper capitaGDP

26 C.W.J. Granger,"InvestigatingCausal Relationsby EconometricModels and Cross-SpectralMethods,"Econometrica37 (Julyi969), 424-38;Engle,Hendry,and Richard(fn.20),280.


19/34

168 WORLD POLITICST-iAyit= (to + ,y2it-i+ , a1+ Ay2t1j+ Eit (6)j=I

whereyi,is the naturallogarithmofper capitaGDP duringyeart forcountryi,andAyi,isthechangeinpercapitaGDP incountryi betweenyeart - i andyeart.Noticethatequation(6) isalgebraicallyequivalenttothe"levels"spec-ificationT

=it13= + E 13jYit-j+ EitwhereP13= (o 13,= i + ct + ct2,AN= o-jaoj, for i


20/34

POVERTY AND THE COUP TRAP 169Estimated parametervalues for this model appear in columntwo ofTable 6. Recent coups have a statisticallyinsignificantcoefficient,butcoups in the distantpast have a slight,statisticallysignificantgrowth-

inhibitingeffect.However,we lack a convincingexplanationforthede-layedemergenceof economicaftershockswith such a long lag.Lagged income has a small growth-inhibitingeffect.All else beingequal, percapitaincomegrowsat a slowerrateinwealthycountriesthanin poor ones, as would be the case ifthere were decreasing returnstoscale in thegrowth technology.Barro also estimatesa small but signifi-cant negative coefficientforper capita income in an income-growthequation for a cross sectionofcountries.29As a checkagainstthepossi-bilitythat the small negativecoefficientofyi,-I is merelytheproductofshort-samplebias,30we reestimateour model using only countriesforwhich we have data forall thirty-threeyearsof the sample period.Thedegreeofshort-samplebias will be reducedin thissubsample.Yet, evenin this subsample of countries,the coefficientofyi2-,remains signifi-cantlynegative.The regionalindicatorsplaya significantrole in our model. In gen-eral, Africancountrieshave substantiallyslower rates of growththanAsian countries.3'Central America and theCaribbean are also plaguedby slow growth.WesternEurope and North America grow somewhatmore rapidly(controllingfor theirhigh per capita incomes) than theAsian countries.The significanceoftheregionalindicatorssuggeststhattheremaybe interregionalheterogeneityamongthe otherparametersofour model. This questionis addressedin the contextof the jointmodelwe develop in thenext section.A theoreticalcase can be made forincludingpopulationand popula-tiongrowthamong theexplanatoryvariablesin thegrowthequation.32When we estimatepopulationgrowthand incomegrowthas a systemofSeeminglyUnrelated RegressionEquations33we findthatshocks to thepopulation-growthand income-growthequationsare correlated(we es-timatep = -0.092). However,thecoefficientsoflaggedpopulationandlaggedpopulationgrowthare insignificantin the GDP growthequation.

29 Robert J.Barro,"A Cross-CountryStudyofGrowth,Saving,and Government,"Na-tionalBureauofEconomicResearchWorkingPaperSeries2855 (Februaryi989), 27.3 See F.H.C. Marriottand J.A. Pope, "Bias in theEstimationof Autocorrelations,"Bio-metrika4I (December I954), 390-402; and M. G. Kendall, "Note on Bias in theEstimationof Autocorrelation,"Biometrika4I (December I954), 403-4.3IMcGowan and Johnson(fn.4), 655.32 Barro (fn. 29), I2- I 7.33 See A. C. Harvey,The EconometricAnalysisofTimeSeries(Oxford:Phillip Allan, i98i),67-73,fora discussionofSeeminglyUnrelatedRegressionEquations.


21/34

170 WORLD POLITICSC. A SIMULTANEOUSMODEL OF COUPS ANDINCOME

Ourattentionnow turnsto theconstructionofa modelthataccountsforthejointendogeneityofincomegrowthand thepropensityfora coupd'etat.Becausethecoupvariableisdiscrete,we cannotimbedthisanal-ysisin a standardsimultaneousequationsframework.Instead,we use alatentvariablemodel pioneeredbyHeckman.34In this model, the dis-crete variable-in our case an indicatorfor whethera coup occurs-isgeneratedbya continuouslatentvariable crossinga threshold,as in theprobitmodel analyzedat the beginningofthissection.Unlike the probitmodel,Heckman's frameworkaccountsforthe simultaneityof continu-ous and discretevariables; in our case, these are the currentrate ofgrowthofincome and the occurrenceofa coup,respectively.As in the previoussection,we letAyi,denote the firstdifferencein thenatural logarithmof per capita income(as measuredby gross domesticproduct)in countryi betweenyearst - I and t; Ayit= yit- yit-. Asbefore,we definez4 as thepropensityofcountryi to have a coup duringyeart, while bi,E {o,I} is an indicatorvariablethatassumesa value of Iif a coup occursin countryi duringyeart; ifnot,it is equal to zero. Theoccurrenceof a coup d'etat,bit, and the propensityfor a coup, z4' arelinkedbythefollowingrelationship:bi,= I ifz4'> o,and bit= o ifzt


22/34

POVERTY AND THE COUP TRAP 171bivariate normal probabilitydistributionwith zero mean, and a vari-ance-covariancematrix I(whose _,thelementwe denotewie).Equations (8a) and (8b) depart fromtheunivariatemodels ofthepre-cedingsectionsin two importantways. First,theyallow for correlationofthedisturbancetermsofthe coup and growthequations.Second, theyallow for simultaneous feedbackbetween the coup propensityand therate ofgrowth.The firstquestionto be addressedin thisframeworkis whethereitherseries is predeterminedwithrespectto the other.36If the errortermsarecorrelatedwith one another,thiswill not be thecase. If incomegrowthwere predeterminedwith respect to coups, we could consistentlyesti-mate its impact by simplyincludingitamong theexplanatoryvariablesin the coup equation (as has been done by others).37In the absence ofpredeterminedness,however,estimatesthattreat income as an exoge-nous variable on theright-handside ofa coup equation (or coups as anexogenous variable on the right-handside of an income-growthequa-tion)will be biased.Failure ofcoups and income to be predeterminedwithrespectto oneanothermay simplybe a resultof commonshocks to both processes.Forexample, an unsuccessfulforeignwarmayhobble economicgrowthandsimultaneouslyprecipitatea coup d'etat. By contrast,lowered incomemay triggera coup directlyrather thanmerelystemfrom a commoncause. Our model allows formore directfeedbackbetweenthe twopro-cesses via the parameters-y and y2,and includespreviouscoups andlagged incomeamong thepredeterminedvariablesin each equation.Ideally, we would like to include all of theright-handside variablesfromthe stand-alonecoup model, equation (5), and the stand-alonein-come-growthmodel, equation (7), in both thecoup and income-growthequationsof our simultaneoussystem.However, if we do so,we will failto identifythemodel fully.38One means of identifyingthe model is to impose the restrictionswI = o and y2 = o. Identificationcan also be achievedbyexcludingfromthecoup equation at least one predeterminedvariablethatappearsinthegrowth equation, and excludingfromthegrowth equation at leastonepredeterminedvariablethatappears in thecoup equation (e.g., settingk,> I, and k22 i). In order to testour model, we require at least one

36 Ibid.37Jackman (fn.4); O'Kane (fn.4, i98i and i983); McGowan and Johnson(fn.4); Johnson,Slater,and McGowan (fn.4).38 Thomas J.Rothenberg,"EfficientEstimationwitha prioriInformation,"CowlesFoun-dationMonograph23 (New Haven: Yale UniversityPress, I973), providesa comprehensivediscussionofidentificationinmodels withendogenousexplanatoryvariables.


23/34

172 WORLD POLITICSoveridentifyingrestrictionin additionto thetwo restrictionsneededtoidentifythemodelfully.Fullyefficientestimatesof equations(8a) and (8b) can beobtainedbyusingthejointtwo-stageAmemiya'sGeneralizedLeastSquares(AGLS)estimationmethod,whichis shown by Newey to be asymptoticallyequivalentto Full InformationMaximumLikelihood estimation(FIML).39This procedurerequiresthatwe firstestimatea reduced-formversionof(8a) and (8b) inwhichall of the exogenousright-handsidevariablesare includedinbothequations.

'6AYit XIZ7rlI + XVi1Tt7l + X2i,7Tl2 + vlit (9a)ZXt 1ii2Trl + X.r1T2W + X~i-r22-v,' (9b)Because we cannotobservethe coup propensitydirectly,but onlywhetherit is positive,we can identifytheparametersof themodelonlyup toa factorofproportionality.To identifythemodel,we imposeanarbitrarybutconvenientnormalizationofthevarianceofthedisturbanceterm(u1it)in thecoup equation(8b):

(O = I - 2y1y2 + 'YIY2 - -2 - 2y2W12This normalizationisconvenientbecauseitimpliesthatthevarianceofv:itin equation(9b)equals i; namely,022 = i. Afterthe reduced-formequationsareestimatedbymaximumlikelihood,thestructuralparame-tersofequations(8a) and (8b)-otxl, oti., xt2w, c22, yl, and y2-are re-coveredfromthereduced-formparametersusingNewey'sversionoftheAGLS procedure.4sEstimatesofthe standarderrorof the disturbancetermof theincome-growthequation,and thecorrelationbetweenthedisturbancesto the income-growthequationand thecoup equation,emergedirectlyfromtheestimationof thereduced-formequationsandare notconditionalon therestrictionsusedtoidentifytheparametersofthestructuralmodel.Estimatesof theparametersof the reduced-formmodelappearinTable 7.The correlationcoefficientbetweenthetwoshockshas an esti-mated value of 0.I323, and is almostthreetimesas largeas its standarddeviation.This indicatesrejectionofthe null hypothesisthatthe shocksare uncorrelatedat all standardsignificancelevels. As discussedabove,correlationsbetween the shocks impliesthatcoups cannotbe treatedaspredeterminedin the incomeequation,noris incomepredeterminedfor

39WhitneyK. Newey,"EfficientEstimationof LimitedDependentVariableModelswithEndogenousExplanatoryVariables,"JournalofEconometrics36 (Novemberi987),23I-50.4?Ibid. See Appendix.


24/34

POVERTY AND THE COUP TRAP 173TABLE 7

JOINT MAXIMUM LIKELIHOOD ESTIMATIONOF THE REDUCED FORM EQUATIONSa

ChangeinDependentVariable Coupsd'Etat percapitaGDPIntercept 0.866 0.076(0.427) (0.013)Recentcoups 0.184 0.0007(0.043) (0.0016)Pastcoups 0.041 - 0.0033(0.032) (0.0016)Lastperiod's(logof) - 0.367 - 0.007percapitaincome (0.061) (0.002)Lastperiod'sgrowthrate - 1.102 0.160(0.743) (0.032)Africa -0.184 -0.017(0.111) (0.003)EuropeandNorthAmerica - 0.034 0.013(0.001) (0.003)SouthAmerica 0.539 - 0.003(0.131) (0.004)Covarianceparameters p = 0.1323(0.0453)a= 0.0571(0.0028)Numberofobservations 2,798Logofthelikelihoodfunction 3533.083aStandarderrorsareshowninparentheses.thepurposesofestimatingthecoupequation.Estimationtechniquesthatfailtoaccountforthisjointendogeneitywill resultin biasedestimates.Ournextquestioniswhetherthecorrelationbetweencoupsand in-comeis simplytheresultof commoninfluenceson both(suchas wars,ornaturaldisasters),orwhethertheyare linkedbya morefundamentalfeedback.We beginbyimposingthefollowingrestrictions:thatthereisno directcontemporaneousfeedbackbetweencoups and income(yI = oand y2 = o), and thatthepasthistoryofcoups has no effecton incomegrowth.(The latterentailsomittingrecentcoupsas wellas coupsinthemoredistantpastfromthegrowthequation.)This setof restrictionsissufficienttoidentifyboththecoupandincomeequations;inaddition,itprovidesuswithtwooveridentifying(andhencetestable)restrictions.Parameterestimatesof the restrictedmodel obtainedby Newey's


25/34

174 WORLD POLITICSAGLS techniqueare reportedin Table 8. The X2testof the overidenti-fyingrestrictionsgeneratesa teststatisticwhosevalue is 4.4I9, indicatingacceptanceeven at the (x = io percentsignificancelevel. Our restrictedmodel embodies the strongresult that coups do not Granger-cause in-come growth;4'moreover,even the currentcoup propensitydoes notaffectthe rate of income growth.This means that,while coups and in-come appear to be affectedbycommon influences,thereis no evidencethat incomegrowthis affectedby coups.Next,we testthe hypothesisthat income does not affectcoups. Con-ditionalon therestrictionsof thepreviousmodel,inwhich coups do notaffectincome,thishypothesisimposes two additionaloveridentifyingre-strictions.That is, it calls fortheexclusionof lagged income growthand

TABLE 8SIMULTANEOUS ESTIMATION USING NEWEY'S JOINT AGLSa

ChangeinDependentVariable Coupsd'Etat percapitaGDPIntercept 0.830 0.0675(0.428) (0.0126)Recentcoups 0.189 b(0.035)Pastcoups 0.035 b(0.034)Lastperiod's(logof) - 0.359 - 0.0062percapitaincome (0.061) (0.0017)Lastperiod'sgrowthrate - 1.097 0.1485(0.750) (0.0317)Africa -0.184 -0.0173(0.111) (0.0034)Europeand NorthAmerica - 0.052 0.0127(0.117) (0.0032)SouthAmerica 0.533 - 0.0061(0.129) (0.0036)Currentgrowthrate b bCurrentcoup propensity b bNumberofoveridentifyingrestrictions 2Chi-squaredStatistic 4.419aStandarderrorsare showninparentheses.bConstrainedtoequalzero.

41Engle, Hendry,and Richard (fn.20), 280.


26/34

POVERTY AND THE COUP TRAP 175thelaggedlevelof incomefromthecoupequation.This modelwasalsoestimatedbyNewey'sAGLS technique,andgenerateda X2statisticof35.569 forthe two additional overidentifyingrestrictions,indicatingre-jection at all levels of standard significance.Per capita income has ahighlysignificantcoup-inhibitingeffect.There is a marked similaritybetween the structuralcoefficientsre-ported in Table 8 and the stand-aloneestimatespresentedin Table 6.Income influencesthecoup propensity,butonlywitha lag. The previousyear'sper capitaGDP plays a significantcoup-inhibitingrole. Likewise,thepreviousyear'sgrowthrate has an impreciselyestimatedcoup-inhib-itingeffect.At least forone formofpoliticalinstability,thecoup d'etat,the much-discussed positive association with the rate of economicgrowthfailstomaterialize.42Our resultsindicatethattheprobabilityofa coup dependsnotonly onpast income,butalso on a country'spast coup experience.We findcom-pellingevidence of the existenceof a "coup-trap": once a countryhasexperienceda coup d'etat,it has a much harder time avoiding furthercoups. This is consistentwith the assertionthatthepoliticalcultureof acountryis severelyeroded bya successfulcoup, and that it takes a longtime forrecoveryto set in.43While coups inflictlong-termpolitical damage, the linkage betweenlow incomeand thethreatof a coup providesan incentiveeven forau-thoritariangovernmentsto promoteeconomicgrowth.In democracies,electionsare used to motivategovernmentsto spur economicgrowth;thosethat failare likelyto be turnedout of officebythevoters.In non-democraticcountries,thethreatof a coup appearstoplaya similarrole.In contrastto the marked influenceof economicperformanceon thepropensityfora coup, coupsoccurringinthe recentpasthaveno system-atic effecton the rate of incomegrowth.This finding,and the inabilityto rejectthe model reportedin Table 8, whichembodies therestrictionthat coups do notGranger-causeincomegrowth,44is analogous to Mc-Callum's conclusionthat U.S. presidentialelectionsdo not significantlyaffectthegrowthrate.45Alesina observes that McCallum's results are consistentwith thehypothesisthatthe electionofRepublican presidentscauses slower-than-average growth, while election victoriesby Democratic presidential

42 Olson (fn.6).43Finer (fn.2).44 Engle,Hendry,and Richard(fn.20), 280.45 BennettMcCallum, "The Political BusinessCycle: An EmpiricalTest,"SouthernEco-nomicJournal44 (JanuaryI978), 504-I5.


27/34


28/34

POVERTY AND THE COUP TRAP 177regionsas well. That is, the 7rparametersinequations(9a) and (9b) maydifferamong regions.The Hausman testprovidesa suitableframeworkto detectthe presenceofinterregionalheterogeneityintheparametersofour model.47If thereis no heterogeneity,thenthe estimatesobtained forthe sample as a whole are efficient;estimatingtheparametersseparatelyfor differentregions resultsin consistentbut inefficientestimates.If in-terregionalheterogeneityis present,however,theestimatesforthesam-ple as a wholewill be biased,whiletheseparateregion-specificestimateswill remain consistent.This putsourproblemsquarelywithintheframe-work of the Hausman test.Another,more extreme,form of heterogeneitywould result if eachcountryhad itsown parameters,so thatthegrowthand coup parametersfor,say, Argentinawould be differentfromtheparametersfor Boliviaor Indonesia. Unfortunately,ifwe attemptedto estimatea separatesetofparametersfor each country,our resultswould be biased due to thewell-known "parameter proliferationproblem."48Although we arethereforeunable totestdirectlyforthisformofheterogeneity,parameterproliferationdoes not preventus fromconsistentlyestimatingthedegreeofinterregionalheterogeneity.We conduct Hausman testsof the null hypothesisof no interregionalheterogeneityin the coefficientson past coups and income in the coupequation. When we estimate the parametersforAfricaseparately,weobtain a teststatisticof2. I28 forthehypothesisofno differencefromtheparametersfor the sample as a whole, correspondingto a p-value of0.952. This indicatesacceptanceat conventionallevels.Likewise, whenwe estimatethe parametersforSouth Americaseparately,theygeneratea Hausman test statistic of 0.I50, with ap-value of o.999, also indicatingacceptance at conventionallevels. When the growth equations for theOECD and non-oEcD countriesare allowed to have separateparameters,we obtain a test statisticof 3.770, correspondingto a p-value of o.8o6.Once again,we failto rejectthehypothesisofno heterogeneity.

V. CONCLUSIONOur analysisindicatesthat theprobabilitythat a governmentis over-thrownby a coup d'etat is substantiallyinfluencedby the rate of eco-

47J. A. Hausman, "SpecificationTests in Econometrics,"Econometrica46 (NovemberI978), I125I-7I.

48 For discussionof thisproblem,see StephenNickell, "Biases in Dynamic Models withFixed Effects," Econometrica 49 (November i98i), I4I7-26; see also the discussion by GaryChamberlin,"Panel Data," in Zvi Grillichesand M. Intrilligator,eds., The Handbook ofEconometrics: Volume II (Amsterdam: North Holland, i983), I248-I3 i8, at I256.


29/34


30/34

POVERTY AND THE COUP TRAP 179(Ayjt,z-*)byyit,and define5it as bit a functionthatassumes a valueof "I" ifzigis positive,and equals zero otherwise.Denote byxi,the i by(k1+k + k2)vector(xi,,XwitX~i)5which consistsof all the variables thatenter eitherequation (8a) or equation (8b). We definethe i by 2 distur-bance vectorui as ui= (uIit2it) and the I X (2 +k1+ 2kw+k2)row vec-toraxis definedas

Ot = (y1,y2,x1 ,cx1 ,, at2Wat22).Recall that yl, and Y2 are scalars, aII is a i byk, vector,cx22 is a i byk2vector,while otx1,and cx2W are i bykto row vectors.Let K = k,+ kv+ k2andletE(uu') = fQ.DefinethevectorfunctionsF(ac),andA(cx)as follows:

I~~~~~~~~Iw ao' 1F(cx)= A(a)= cot, at'whereF(ox) is a 2 by2 matrix,and A(a) is a K by2 matrix,and thezerovectorsare definedconformably.

Using thisnotation,we can writeequations (8a) and (8b) in themorestreamlinedform:yjjF(ot)= xitA(oa)+ ui (A.i)Postmultiplyingbothsides ofequation(A. i) by [r(o)]-i resultsin a con-venientexpressionforequations(9a) and (9b):

Yit= XJtH(at) + Vi (A.2)where11(ot) = A(oa)[r(cx)]-I is theK by2 matrixofreducedformparam-eters.For convenience,let ir1(aL) denotethe firstcolumnofir(o), and ITr2((x) thesecondcolumn.Noticethatthevectorof disturbancesfromequation(A.2) satisfies:v = u[r()]-I.Ifwe letE denote the variance-covariancematrixforthe reducedformparameters,thenwe obtain:

X ([norit)] I wr(o)-i).We letwX,and rijdenotethe (jj)t/ elementsoffl and X respectively.Tosimplifytheestimation,we imposethe restrictionthat ,,22= i. This resultsin a fairlymessynormalizationofw22; namely

(Jl)22 = - 2y~y2 + -yIy - 2Y2WI2 - y2WI.This allowsus towriteE in theform:

[U2 pal>,= L~P IJ


31/34

180 WORLD POLITICSHerewe let p denotethecorrelationbetweenvItandvi, and 0.2 is thevarianceofv1ii.We assumethatvi,has a normalprobabilitydistribution.So, thejointdensityofv,andv2(wherewesuppressthe(it) partofthesubscripttoavoidclutterednotation)is givenby:

4(V)= 2~U\/)I exp(- - vEiv')+(v) = exp ( - ( ) (VI- 2PUVIV2+ UTV2V)).21TT&\/(I T') U(-p2Completingthesquare,thisexpressionsimplifiesto:+(v) -I exp{ 2(I-p2)u2 (v( - P2) + ((V2 - PV)2-)}Now,define: I J _4(z;T) = exp 2T2|

andthecorrespondingcumulativedensityfunctionas:F(zT)= f (v*;T)dv*.J-0

This allows+(v) to be factorizedinto:40() = 4(Pv1;U)4(V2 - (P/U)v1;(I - P2)1/2).

Accordingly,the contributionof the(i,tr observationto thelikelihoodfunctionis:Xit'Tr(00

lit = 5itln(J 4(vuit;u)4(v p/lVIIvt;(i p2)2)dv)*)

+ (I - 5j)In( 4(vuit;()4(v - p/(v I,;(I - p2)I/2)dv*)X4t1T2(0L)

wherevIit= Ay,- X,,Tr(1t)These integralscanbe moresimplywrittenbyusinga changeofvaria-bles,namely:Tilas (Vo sPipfVIiIedepesi

This leadsto thesimplifiedexpression:


32/34

POVERTY AND THE COUP TRAP 181lit bitln(F((xjtTrs2(ot) - (p/u)v1i)/(i - p2)I/2; I)

+ (I - bi)ln[I - (F((xTr2(cx) - (p/l)i)/(i - p2)I/2;I)] (A.3)+ In4P(vjt;u)with v1,' =A yit- xitIr1(t). We shall adopt the streamlined notation:

J Tl*(a,p,u) = l(H0(c),pu) = E lit. (A.4)= I t=1I

Notice that l*(ao,p,u) depends on the parameterat directly,whereasl(I(ao),p,o) depends on otonlyindirectly,throughtheH1-matrix.This dis-tinctionmustbe bornein mind inwhatfollows.Having definedthe likelihoodfunction,we couldproceedtomaximizeitdirectly.However, as a practicalmatter,thefunctionl*(ot,p,U)is fairlyim-pervioustostandardmaximizationtechniques.We employthepracticalal-ternativeof Amemiya'sGLS technique,as refinedby Newey (fn.39). Weproceedin twostages.In Stage I, we maximizel(HI,pu)withrespecttoHI,p, a. In Stage 2, we use a variantof theminimumX2techniquetorecoverat fromour estimateofHI.Stage1: Estimatingthe"ReducedForm" Parameters:HFirst, we exploitthe factthatour likelihoodfunctionfactorsinto theproductof thelikelihoodfunctioncorrespondingto thegrowthequation,whose log isgivenby:

In(P(v~j,;(r)and thelikelihoodfunctionof a probitmodel thatcorrespondstothecoupequation,amendedbytheadditionofv1j,totheotherconditioningvariables:bitIn},and xii,andeitaretheindependentvariables.Let 42 denotethevectorof coefficientsofxit,and Cthe coefficientofeit.Notice that in equation (A.3), theargumentof the normal cumulativedensityfunctionsis:

(X,7rr2() - (p/a)VI)/(i - p2)1/2.In theprobitmodel estimatedin thisstepoftheprocedure,theargumentsofthestandardnormalcumulativedensityfunctionsintheprobitlikelihoodarexitX2+ VP


33/34

182 WORLD POLITICS(3) Let aT,I 4, I = T, :2 = 4|(I + r2T2)I/2P = ;T/(I + 272)I/2, and fi = (XT |2)

These parametersare themaximumlikelihoodestimatorsof thereducedformparameters;II, cr,and p. To be precise,II, a, and p solve:max l(fl,p,u).[,pJThis leavesus withtheproblemofrecoveringtheatparametersfromthefl-matrix.Stage2: Recoveringthe "StructuralParameters"fromtheH-matrixThe standardprocedureforachievingthis(see,forexample,Rothenberg,fn.38) is touse minimumX2estimation.That is,to solve:

min [vec(Hl(at)) - vec(fl)]'A; '[vec(Hl(oc)) - vec(fl)](xwhereforanymatrixZ, vec(Z) isa columnvectorconsistingofthecolumnsofZ, "stacked" one atop the other,with the firstcolumn at the top,and thelastat thebottom.The matrixAl denotesthevariance-covariancematrixofthe estimatedreducedformparametervector:vec(fl). The minimumX2techniquewas shownbyRothenberg(fn.38) to be equivalenttodirectmax-imumlikelihoodestimationof thestructuralparameters(e.g.,cx).However,the relationbetweencx and vec(1l7)is nonlinear,makingminimumchi-squaredestimationsomewhatcomplicated.Newey (fn. 39) establishesthatthefollowingadaptationofAGLS esti-mation is equivalentto minimumchi-squaredestimation.To begin,weadoptthe followingnotation:0 denotesthei byK matrixofzeros,I2Kis the2K by 2K identitymatrix,and we denotebyI[a:b] the submatrixof I,


34/34

POVERTY AND THE COUP TRAP 183(i) We estimatethevariance-covariancematrixofvec(I1), A,, via Efron'sbootstraptechnique(fn.i6), withI,024 replications.(2) We obtainconsistentestimatesof-y,and y2byrunningtheregressionofvec(LI) on g1,g2,HI1,H1.,H2.,andH22usingOLS. The coefficientsof g, andg2 (whichwe denoteyyand -yrespectively)areconsistent(butnotefficient)estimatorsofAyand y2.

ILet fI*= [2I

(3) Let : = (IK0F*)A(IK0F*)', whereIK is theK byK identitymatrix.We use as our estimatorofthevariance-covariancematrixforthe GLSregression.Newey showsthattheresultingestimateof(x is fullyefficient,and thatthe standarderrorsfromtheGLS estimatorare thetruestandarderrors.Finally,letpred[vec(1I)]denotethepredictedvalue ofvec(LL)fromtheGLS regressionofvec(fl) on gl,g2,H1IH,,H 2WH22. Then, if thereare moveridentifyingrestrictionsimposedon themodel,(pred[vec(II)] - vec(Il))'As I(pred[vec(tI)]- vec(LL))

has (asymptotically)a X2distributionwithmdegreesoffreedom,permittingan easytestof our model.

Poverty, the coup trap...

Documents

Transcript of Poverty, the coup trap...