Measuring Political Credibility

The theoretical discussion in the previous chapter revealed the importance that political credibility has for private economic activity and economic growth. The remaining two chapters of Part I will test this hypothesis. In order to do this it is necessary to find an empirically workable measure of the political credibility of a country. We will therefore review the literature to see whether there are any existing measures that could be used for this purpose. This chapter also discusses different ways of improving measurements and concludes that the best way to grasp the effects of politics on the private sector is to ask entrepreneurs directly. The last section of this chapter therefore describes how a measure of the political credibility of 28 LDCs was developed by asking private firms about their experiences with the institutional framework.