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Democracy and growth: An alternative empirical approach

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  • Shen, Jian-Guang

    ()
    (BOFIT)

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    Abstract

    This paper proposes a “before-and-after” approach to empirical examination of the relationship between democracy and growth. Rather than the commonly used cross-country regression method, this paper compares the economic performances of forty countries before and after they became democracies or semi-democracies sometime within the last forty years. The empirical evidence indicates that an improvement in growth performance typically follows the transformation to democracy. Moreover, growth under democracy appears to be more stable than under authoritarian regimes. Interestingly, wealthy countries often experience declines in growth after a democratic transformation, while very poor nations typically experience accelerations in growth. Growth change appears to be negatively related to the initial savings ratio and positively related to the export ratio to GDP. Partial correlation between growth change and primary school or secondary school enrollments and the ratio of government expenditure to GDP is not identified.

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    Bibliographic Info

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 13/2002.

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    Length: 32 pages
    Date of creation: 12 Nov 2002
    Date of revision:
    Handle: RePEc:hhs:bofitp:2002_013

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    Web page: http://www.suomenpankki.fi/bofit_en/
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    Keywords: democracy; economic growth;

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    1. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
    2. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
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    5. Sah, R.K., 1991. "Fallibility In Human Organizations And Political Systems," Papers 625, Yale - Economic Growth Center.
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    8. Clague, Christopher, et al, 1996. " Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-76, June.
    9. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
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    11. Olivier Blanchard & Andrei Shleifer, 2000. "Federalism with and without Political Centralization: China versus Russia," NBER Working Papers 7616, National Bureau of Economic Research, Inc.
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    14. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    15. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-62, June.
    16. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    17. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
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    19. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
    20. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc.
    21. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
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    Cited by:
    1. World Bank, 2007. "Angola : Oil, Broad-Based Growth, and Equity," World Bank Publications, The World Bank, number 6759.
    2. Ana Margarida Oliveira Brochado & Francisco Vitorino Martins, 2005. "Democracy and Economic Development: a Fuzzy Classification Approach," FEP Working Papers 180, Universidade do Porto, Faculdade de Economia do Porto.
    3. Branko Milanovic, 2005. "The Modern World: The effect of democracy, colonialism and war on economic growth 1820-2000," Development and Comp Systems 0509002, EconWPA.

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