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Democracy and Development: The Devil in the Details

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  • Torsten Persson
  • Guido Tabellini

Abstract

Does democracy promote economic development? We review recent attempts to addresses this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic reforms. First, democratizations and economic liberalizations in isolation each induce growth accelerations, but countries liberalizing their economy before extending political rights do better than those carrying out the opposite sequence. Second, different forms of democratic government and different electoral systems lead to different fiscal and trade policies: this might explain why new presidential democracies grow faster than new parliamentary democracies. Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 2 (May)
Pages: 319-324

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:2:p:319-324

Note: DOI: 10.1257/000282806777212396
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  1. Elias Papaioannou & Gregorios Siourounis, 2007. "Democratization And Growth," CEDI Discussion Paper Series 07-13, Centre for Economic Development and Institutions(CEDI), Brunel University.
  2. Torsten Persson & Guido Tabellini, 2006. "Democratic capital: The nexus of political and economic change," Levine's Bibliography 122247000000001304, UCLA Department of Economics.
  3. Francesco Giavazzi & Guido Tabellini, 2004. "Economic and Political Liberalizations," Levine's Bibliography 122247000000000724, UCLA Department of Economics.
  4. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  5. Persson, Torsten, 2005. "Forms of Democracy, Policy and Economic Development," CEPR Discussion Papers 4938, C.E.P.R. Discussion Papers.
  6. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
  7. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, December.
  8. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
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