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Democracy, Technology, and Growth

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  • Philippe Aghion
  • Alberto Alesina
  • Francesco Trebbi

Abstract

We explore the question of how political institutions and particularly democracy affect economic growth. Although empirical evidence of a positive effect of democracy on economic performance in the aggregate is weak, we provide evidence that democracy influences productivity growth in different sectors differently and that this differential effect may be one of the reasons of the ambiguity of the aggregate results. We provide evidence that political rights are conducive to growth in more advanced sectors of an economy, while they do not matter or have a negative effect on growth in sectors far away from the technological frontier. One channel of explanation goes through the beneficial effects of democracy and political rights on the freedom of entry in markets. Overall, democracies tend to have much lower entry barriers than autocracies, because political accountability reduces the protection of vested interests, and entry in turn is known to be generally more growth-enhancing in sectors that are closer to the technological frontier. We present empirical evidence that supports this entry explanation.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13180.

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Date of creation: Jun 2007
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Handle: RePEc:nbr:nberwo:13180

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Cited by:
  1. Akerman, Anders & Larsson, Anna & Naghavi, Alireza, 2011. "Autocracies and Development in a Global Economy: A Tale of Two Elites," Research Papers in Economics 2011:24, Stockholm University, Department of Economics.
  2. Fedderke, Johannes & Klitgaard, Robert, 2013. "How Much Do Rights Matter?," World Development, Elsevier, vol. 51(C), pages 187-206.
  3. Sara Corujo & Marta Simões, 2012. "Democracy and Growth: Evidence for Portugal (1960–2001)," Transition Studies Review, Springer, vol. 18(3), pages 512-528, March.
  4. Hellmanzik, Christiane, 2013. "Democracy and economic outcomes: Evidence from the superstars of modern art," European Journal of Political Economy, Elsevier, vol. 30(C), pages 58-69.
  5. Andrey A. GNIDCHENKO, 2011. "Defragmentation Of Economic Growth With A Focus On Diversification: Evidence From Russian Economy," Theoretical and Practical Research in Economic Fields, ASERS Publishing, vol. 0(1), pages 45-85, June.
  6. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563 Elsevier.
  7. Seim, Anna Larsson & Parente, Stephen L., 2013. "Democracy as a middle ground: A unified theory of development and political regimes," European Economic Review, Elsevier, vol. 64(C), pages 35-56.
  8. Joseph P. Hughes & Loretta J. Mester, 2008. "Efficiency in banking: theory, practice, and evidence," Working Papers 08-1, Federal Reserve Bank of Philadelphia.
  9. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2009. "Political Selection and Persistence of Bad Governments," NBER Working Papers 15230, National Bureau of Economic Research, Inc.
  10. 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.
  11. David Cuberes & Michał Jerzmanowski, 2009. "Democracy, Diversification and Growth Reversals," Economic Journal, Royal Economic Society, vol. 119(540), pages 1270-1302, October.
  12. Che, Jiahua & Chung, Kim-Sau & Qiao, Xue, 2013. "The good, the bad, and the civil society," Journal of Public Economics, Elsevier, vol. 106(C), pages 68-76.
  13. Olper, Alessandro & Raimondi, Valentina, 2009. "Constitutional Rules and Agricultural Policy Outcomes," Agricultural Distortions Working Paper 50304, World Bank.

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