The causal effect of legitimacy and
accountability on economic prosperity in the
Europe
Pepijn Pastoor p.j.pastoor@uvt.nl
Tilburg University
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Research question:
This study has two objectives:
1. To investigate the historical effect of the legitimacy and accountability of
governance on economic prosperity in Europe.
2. To provide an economic model that can aid the European Council in future
evaluations of (proposed) economic policy.
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Motivation:
Democratic legitimacy and accountability are considered prerequisites for further economic integration in Europe [1]. This argument is currently founded
within political philosophy, where both legitimacy and accountability contribute
to the justification of the state and in this specific case the transfer of sovereignty
from the state to a union. As for now, research on the subject from an economical perspective is scarce, and the economic impact of increased legitimacy and
accountability is unclear.
Research on the causal effect of legitimacy and accountability on economic prosperity can further understanding about the potential role of the European Union
within the economic landscape. In addition there might be a case of reverse
causality, as the economic gains from being in a union are likely to add to the
legitimacy of the union itself. Clarifying this relationship will contribute to the
current debate where legitimacy and accountability are seen as prerequisites for
further economic integration. In the case of reverse causality some economic
integration might be necessary for legitimacy and accountability to increase.
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Research methodology
Data collection
The time-period included in the analysis is limited by the availability of reliable
data. An initial lookup of potential datasets suggests that a time-period from
the beginning of the 19th century onwards would be feasible.
Legitimacy
State legitimacy includes the extend to which citizens believe the state to legitimately hold and exercise political power. An elaborate list of potential variables
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that can be retrieved for the given time period are displayed in Table 1. For
the variables available over the time-period of interest one parameter L can be
constructed as a weighted average between 0 and 1. The validity of L as a
proxy for legitimacy can partly be tested by comparing relative values to other
research on the topic, most notably by Gilley [2].
Accountability
Accountability includes the ability to hold governance responsible for their actions. In order to measure accountability a number of potential variables is
included in Table 1. Similar to the construction of L, a variable A is constructed as a weighted average between 0 and 1. Once again the validity of the
variable over the complete time period can partly be confirmed by comparing
the relative values to other research on accountability, e.g. the Global Integrity
Index [3].
Economic prosperity
In an attempt to find a proxy for economic prosperity several paths can be
followed. The current EU objective of smart, sustainable and inclusive growth
would make the analysis problematic as especially the concepts of smart and
sustainable growth are relatively new and likely not to be achieved over the
majority of the time-period.
Arguably the best measurement of individual economic prosperity is per capita
income. Therefore, a measure of per capita income change and per capita income is included in the regression. Nevertheless, it should be clear that per
capita income excludes intangibles including many of the services provided by
the welfare state in European countries and as such is an imperfect proxy. A
possible solution would encompass estimating the value of these intangibles.
Regression analysis
The approach taken is similar to the research by Hall and Jones [4] into ultimate
causes of per worker output differences. The constructed variables L (for legitimacy) and A (for accountability) are first used as the dependent variable in a
2SLS regression to check for reverse causality. For example L can be regressed
on historic economic prosperity.
The estimates for A and L obtained from the first regression are then used to
analyse their effect on economic prosperity. The initial regression is displayed
in equation 1.
Y
= α + β1 A + β2 L + ε
(1)
L
The dependent variable can be adjusted to include different measures of
economic prosperity. Additionally, as societies do not change overnight it might
be wise to include A and L from previous years in the regression.
log
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Table 1: Potential variables to be used in research
Legitimacy
’Voluntary taxes’
Civil protest
Coups
Civil war
Y/L lagged
Voter turnout as percentage of eligible voters
Political violence
Size of internal police force
Political prisoners
Mass emigration
Crime levels
Military recruitment
Popular mobilisation in authoritarian states
Civil disobedience
Accountability
Constitutional division of powers
Independent court
Autocratic Government
Constitutional Democracy
EU Memberstate
References
[1] Herman van Rompuy, Towards a genuine Economic and Monetary Union.
European Council Report, Brussels, 2012.
[2] Bruce Gilley, The meaning and measure of state legitimacy. European Journal of Political Research, 45: 499–525, 2006.
[3] Data on accountability as collected by the Global Integrity Organisation,
retrievable from http://www.globalintegrity.org/report.
[4] Robert E. Hall and Charles I. Jones Why do Some Countries Produce So
Much More Output Per Worker than Others?. The Quarterly Journal of
Economics, 114: 83-116, 1999.
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