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Does Democracy Facilitate Economic Growth Or Does Economic Growth Facilitate Democracy? An Empirical Study Of Sub-Saharan Africa

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  • Paresh Narayan
  • Seema Narayan
  • Russell Smyth

Abstract

This paper examines the relationship between democracy and economic growth in 30 Sub-Saharan African countries. As our proxy for democracy we first use the democracy index constructed by Freedom House and then check the sensitivity of our findings using, as an alternative proxy for democracy, the Legislative Index of Electoral Competitiveness (LIEC). We find support for the Lipset hypothesis - in the long run, real GDP Granger causes democracy and an increase in GDP results in an improvement in democracy – in Botswana and Niger with both datasets, for Chad with the Freedom House data only and for Cote d’Ivoire and Gabon with the LIEC data only. Support for the compatibility hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a positive effect on real income - is found for Botswana with the Freedom House data and for Madagascar, Rwanda, South Africa and Swaziland with the LIEC data. Support for the conflict hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a negative effect on real income - is found for Gabon with the Freedom House data and Sierra Leone with the LIEC data.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 10-07.

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Length: 40 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-10

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Keywords: Causality; Democracy; Economic Growth; Sub-Saharan Africa.;

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Cited by:
  1. Iqbal, Nasir & Daly, Vince, 2014. "Rent seeking opportunities and economic growth in transitional economies," Economic Modelling, Elsevier, vol. 37(C), pages 16-22.
  2. Vishal Jaunky, 2013. "Democracy and economic growth in Sub-Saharan Africa: a panel data approach," Empirical Economics, Springer, vol. 45(2), pages 987-1008, October.
  3. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
  4. Simplice A, Asongu, 2011. "Government quality determinants of stock market performance in developing countries," MPRA Paper 35508, University Library of Munich, Germany.
  5. Madeeha Gohar Qureshi & Eatzaz Ahmed, 2012. "The Inter-linkages between Democracy and Per Capita GDP Growth: A Cross Country Analysis," PIDE-Working Papers 2012:85, Pakistan Institute of Development Economics.
  6. Asongu Simplice, 2011. "Law, Democracy and the Quality of Government in Africa," Working Papers 11/018, African Governance and Development Institute..
  7. Asongu Simplice, 2011. "Finance and Democracy in Africa," Working Papers 11/020, African Governance and Development Institute..

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