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Democratic Capital: The Nexus of Political and Economic Change

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  • Torsten Persson
  • Guido Tabellini

Abstract

We study the dynamics of economic and political change, theoretically and empirically. Democratic capital measured by a nation's historical experience with democracy, and the incidence of democracy in its neighborhood, appears to reduce exit rates from democracy and raise exit rates from autocracy. Higher democratic capital stimulates growth by increasing the stability of democracies. Heterogeneous effects of democracy induce sorting of countries into political regimes, which helps explain systematic differences between democracies and autocracies. Our results suggest the possibility of a virtuous circle, where accumulation of physical and democratic capital reinforce each other, promoting economic development and consolidation of democracy. (JEL D72, I31, N10, N40, O47)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 1 (2009)
Issue (Month): 2 (July)
Pages: 88-126

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Handle: RePEc:aea:aejmac:v:1:y:2009:i:2:p:88-126

Note: DOI: 10.1257/mac.1.2.88
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  1. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  2. Edward Glaeser & Giacomo Ponzetto & Andrei Shleifer, 2006. "Why Does Democracy Need Education?," NBER Working Papers 12128, National Bureau of Economic Research, Inc.
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  17. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
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