Exploring the Connection Between Economic Conditions and Societal Stability

Abstract

This study delves into the nuanced interplay between economic conditions and societal stability on a global scale. Utilizing panel data analysis spanning diverse nations and temporal contexts, our research endeavours to furnish a comprehensive understanding of how economic factors shape pivotal indicators of societal equilibrium. A spectrum of economic metrics, encompassing GDP per capita, inflation, unemployment, poverty, inequality and trade openness, is scrutinized. The analysis focalizes on dependent variable, the rule of law. Employing a Fixed Effect instrumental variable model on an unbalanced panel dataset, our findings underscore several significant revelations. Notably, the study discerns that government effectiveness, anti-corruption measures, and political stability exert a positive influence on the rule of law, whereas GDP per capita, unemployment and trade openness significantly exhibit adverse effects. This study thus contributes valuable insights into the intricate dynamics between economic phenomena and societal cohesion, offering implications for policymakers and scholars alike in fostering sustainable development and stability.