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The Growth Effect of Democracy: Is It Heterogenous and How Can It Be Estimated?

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  • Torsten Persson
  • Guido Tabellini

Abstract

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular, we find an average negative effect on growth of leaving democracy on the order of -2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel. Heterogenous characteristics of reforming and non-reforming countries appear to play an important role in driving these results.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13150.

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Date of creation: Jun 2007
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Handle: RePEc:nbr:nberwo:13150

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  1. Torsten Persson & Guido Tabellini, 2006. "Democratic Capital: The Nexus of Political and Economic Change," NBER Working Papers 12175, National Bureau of Economic Research, Inc.
  2. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  3. Francesco Giavazzi & Guido Tabellini, 2004. "Economic and Political Liberalizations," NBER Working Papers 10657, National Bureau of Economic Research, Inc.
  4. Persson, Torsten & Tabellini, Guido, 2006. "Democracy and Development: The Devil in the Details," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5499, C.E.P.R. Discussion Papers.
  5. Torsten Persson, 2005. "Forms of Democracy, Policy and Economic Development," NBER Working Papers 11171, National Bureau of Economic Research, Inc.
  6. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 1-19.
  7. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2001. "Evaluating the employment impact of a mandatory job search assistance program," IFS Working Papers, Institute for Fiscal Studies W01/20, Institute for Fiscal Studies.
  8. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 261-94, April.
  9. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, American Economic Association, vol. 95(2), pages 50-55, May.
  10. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  11. Susan Athey & Guido W. Imbens, 2002. "Identification and Inference in Nonlinear Difference-In-Differences Models," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0280, National Bureau of Economic Research, Inc.
  12. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(3), pages 835-864, August.
  13. Elias Papaioannou & Gregorios Siourounis, 2007. "Democratization And Growth," CEDI Discussion Paper Series, Centre for Economic Development and Institutions(CEDI), Brunel University 07-13, Centre for Economic Development and Institutions(CEDI), Brunel University.
  14. Timothy Besley & Masayuki Kudamatsu, 2007. "Making autocracy work," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3764, London School of Economics and Political Science, LSE Library.
  15. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661926, December.
  16. Edward Glaeser & Giacomo Ponzetto & Andrei Shleifer, 2006. "Why Does Democracy Need Education?," NBER Working Papers 12128, National Bureau of Economic Research, Inc.
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