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Crises and Government: Some Empirical Evidence

In this paper we examine a panel of 70 countries during 1966-2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross section regressions using 40-year (1970-2010) changes in government variables. Governance institutions appear persistent to the extent that even crisis episodes fail to leave a significant mark upon them. However, crises do appear to be associated with increases in countries’ freedom to trade internationally. Also, over 30-year periods, more years spent in crisis are associated with weaker legal systems and property rights.