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The Political U: New Evidence on Democracy and Income

Author

Listed:
  • Campos, Nauro F.

    (University College London)

  • Coricelli, Fabrizio

    (Paris School of Economics)

  • Frigerio, Marco

    (University of Siena)

Abstract

This paper throws new light on the relationship between income and democracy. Using data for 162 countries over 1960-2018, we show that the causal relationship between political and economic development is U- shaped: "intermediate" political regimes significantly lead to inferior economic performance vis-à-vis both "democracies" and "autocracies." Our results suggest "intermediate" regimes decrease long run GDP per capita by about 20 percent. These effects are mainly driven by political instability, while other potential mechanisms, such as education, investment and inequality, lack comparable empirical support. These findings are robust to, among others, using night-lights instead of GDP, different democracy measures and estimators.

Suggested Citation

  • Campos, Nauro F. & Coricelli, Fabrizio & Frigerio, Marco, 2022. "The Political U: New Evidence on Democracy and Income," IZA Discussion Papers 15598, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15598
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    References listed on IDEAS

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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    2. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    3. Fearon, James D, 2003. "Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
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    Cited by:

    1. Jiekuan Zhang & Yan Zhang, 2023. "Examining the effects of economic growth pressure on green total factor productivity: evidence from China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4309-4337, December.

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    More about this item

    Keywords

    democracy; income; growth; political development; economic development; non-linearity;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F15 - International Economics - - Trade - - - Economic Integration
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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