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Path to Prosperity: The Dynamics of Freedom and Economic Development

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  • Yi Feng
  • Jacek Kugler
  • Siddharth Swaminathan
  • Paul J. Zak

Abstract

We present a dynamic general equilibrium model that formalizes the political mechanisms that prompt demographic change and augment economic development. We demonstrate that in addition to well-established economic determinants, fertility decisions, human capital accumulation and economic development are altered by three fundamental political variables: political freedom, political stability, and political capacity. Using the model, we derive a set of conditions that enable poor nations to escape poverty traps. The formal deductions are supported by empirical analysis utilizing a panel of 108 countries from 1960 to 2004. Our findings demonstrate that political change triggers a demographic transition that catapults nations onto the path of sustained economic growth. Our results show that developing nations with capable, free, and stable political systems can substantially close the economic gap that divides rich nations from poor nations within a generation.

Suggested Citation

  • Yi Feng & Jacek Kugler & Siddharth Swaminathan & Paul J. Zak, 2008. "Path to Prosperity: The Dynamics of Freedom and Economic Development," International Interactions, Taylor & Francis Journals, vol. 34(4), pages 423-441, December.
  • Handle: RePEc:taf:ginixx:v:34:y:2008:i:4:p:423-441
    DOI: 10.1080/03050620802561488
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    Cited by:

    1. Travis G. Coan & Tadeusz Kugler, 2012. "All Foreign Direct Investment Is Local: Indian Provincial Politics and the Attraction of FDI," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 13(1), pages 27-50, March.
    2. Boussalis, Constantine & Nelson, Hal T. & Swaminathan, Siddharth, 2012. "Towards comprehensive malaria planning: The effect of government capacity, health policy, and land use variables on malaria incidence in India," Social Science & Medicine, Elsevier, vol. 75(7), pages 1213-1221.

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