Democracy and Growth: A Relationship Revisited
AbstractA considerable theoretical and empirical literature failed to reach consensus on the relevance of the nature of political regimes for economic performance. Research on democracy's effect on growth is inconclusive. At the same time, a few studies and cases find authoritarianism to display growth-enhancing attributes. This paper revisits the issue, finding that the debate severely lacks an appropriate description of pertinent characteristics of the sociopolitical environment. Using the framework of the neoclassical growth theory, a model is augmented with a more comprehensive representation of the political economy. It assumes a nonlinear relationship between regime type and economic growth, and introduces the concept of initial democratic capital. The results suggest that democracies are more conducive to growth, particularly in the presence of a tradition of democracy. Sociopolitical stability is also shown to be a necessary complementary condition. Economic freedom and high-level human capital are found favorable for growth. Democracy and economic freedom exhibit diminishing marginal returns for growth. The results are robust to different specifications of the model.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 29 (2003)
Issue (Month): 1 (Winter)
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Authoritarianism; Democracy; Growth; Political;
Find related papers by JEL classification:
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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