Regime Change, Democracy and Growth
AbstractTheory and empirics are ambiguous on the effect of democracy on growth. Cross-country studies find that democracy has no significant impact on growth. In contrast, within-country studies find a strong positive effect of transition to democracy. We reconcile this inconsistency by showing that the positive effect of political transition is a result of swift regime change and not democratization. We identify and examine 90 successful, failed, and gradual transitions that have occurred over the last half century. This new classification permits us to compare successful episodes of democratization with unsuccessful ones -- as opposed to with the counterfactual of no transition. We find that both successful and failed transitions boost long-run growth by about one percentage point, but gradual change is quite costly in economic terms. The results imply that the growth dividend from political transition is a result of regime change and not democratization, and also offer new evidence on the importance of the speed of transition for economic growth. The results are robust to a number of alternative specifications, to stricter and more lenient definitions of democratic transition, and to including reverse transitions.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9282.
Date of creation: Jan 2013
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Find related papers by JEL classification:
- N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-DEV-2013-04-13 (Development)
- NEP-FDG-2013-04-13 (Financial Development & Growth)
- NEP-POL-2013-04-13 (Positive Political Economics)
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- Padamja Khandelwal & Agustin Roitman, 2013. "The Economics of Political Transitions: Implications for the Arab Spring," IMF Working Papers 13/69, International Monetary Fund.
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