IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/56621.html
   My bibliography  Save this paper

Does Democracy Impact Economic Growth? Exploring the Case of Bangladesh – A Cointegrated VAR Approach

Author

Listed:
  • Dasgupta, Shouro
  • Bhattacharya, Debapriya
  • Neethi, Dwitiya Jawher

Abstract

The key socioeconomic indicators of Bangladesh have apparently experienced improvement since the advent of a new phase of democracy in 1991. This paper examines the impact of democracy on economic growth in Bangladesh using a cointegrated Vector Autoregressive model. Results suggest that democracy as practiced in Bangladesh does not seem to have a significantly positive impact on economic growth, and at the same time authoritarian regimes tend to have a significantly negative impact on economic growth. Inadequate democratic decision making practices, ineffective policy designs and weak policy making institutions are some of the likely causes behind this relationship. The situation is aggravated by the fact that the institutions do not positively alter the decision making behaviour even under democratically elected regimes.

Suggested Citation

  • Dasgupta, Shouro & Bhattacharya, Debapriya & Neethi, Dwitiya Jawher, 2013. "Does Democracy Impact Economic Growth? Exploring the Case of Bangladesh – A Cointegrated VAR Approach," MPRA Paper 56621, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56621
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/56621/1/MPRA_paper_56621.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montinola, Gabriella R. & Jackman, Robert W., 2002. "Sources of Corruption: A Cross-Country Study," British Journal of Political Science, Cambridge University Press, vol. 32(1), pages 147-170, January.
    2. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    3. Bohara, Alok K. & Gawande, Kishore & Sanguinetti, Pablo, 2004. "Trade diversion and declining tariffs: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 64(1), pages 65-88, October.
    4. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    5. Grigorian, David A. & Martinez, Albert, 2000. "Industrial growth and the quality of institutions : what do (transition) economies have to gain from the Rule of Law?," Policy Research Working Paper Series 2475, The World Bank.
    6. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(2), pages 225-248, April.
    7. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014, December.
    8. Torsten Persson & Guido Tabellini, 2007. "The growth effect of democracy: Is it heterogenous and how can it be estimated?," Working Papers 322, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    9. Ludovic Comeau, 2003. "Democracy and Growth: A Relationship Revisited," Eastern Economic Journal, Eastern Economic Association, vol. 29(1), pages 1-21, Winter.
    10. de Haan, Jakob & Sturm, Jan-Egbert, 2003. "Does more democracy lead to greater economic freedom? New evidence for developing countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 547-563, September.
    11. Daniel Lederman & Norman V. Loayza & Rodrigo R. Soares, 2005. "Accountability And Corruption: Political Institutions Matter," Economics and Politics, Wiley Blackwell, vol. 17, pages 1-35, March.
    12. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521793797.
    13. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
    14. Kapstein,Ethan B. & Converse,Nathan, 2008. "The Fate of Young Democracies," Cambridge Books, Cambridge University Press, number 9780521732628.
    15. Minier, Jenny A, 1998. "Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-266, September.
    16. Przeworski,Adam & Alvarez,Michael E. & Cheibub,Jose Antonio & Limongi,Fernando, 2000. "Democracy and Development," Cambridge Books, Cambridge University Press, number 9780521790321.
    17. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
    18. Barnhart, Scott W. & Darrat, Ali F., 1989. "Federal deficits and money growth in the United States : A vector autoregressive analysis," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 137-149, March.
    19. Lutkepohl, Helmut, 1982. "Non-causality due to omitted variables," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 367-378, August.
    20. Kapstein,Ethan B. & Converse,Nathan, 2008. "The Fate of Young Democracies," Cambridge Books, Cambridge University Press, number 9780521494236.
    21. Krieckhaus, Jonathan, 2006. "Democracy and Economic Growth: How Regional Context Influences Regime Effects," British Journal of Political Science, Cambridge University Press, vol. 36(2), pages 317-340, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mogens Justesen & Peter Kurrild-Klitgaard, 2013. "Institutional interactions and economic growth: the joint effects of property rights, veto players and democratic capital," Public Choice, Springer, vol. 157(3), pages 449-474, December.
    2. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    3. Freund, Caroline & Jaud, Melise, 2013. "Regime Change, Democracy and Growth," CEPR Discussion Papers 9282, C.E.P.R. Discussion Papers.
    4. Jorge Braga Macedo & Joaquim Oliveira Martins & João Tovar Jalles, 2021. "Globalization, Freedoms and Economic convergence: an empirical exploration of a trivariate relationship using a large panel," International Economics and Economic Policy, Springer, vol. 18(3), pages 605-629, July.
    5. Carl Henrik Knutsen, 2012. "Democracy and economic growth: A survey of arguments and results," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 15(4), pages 393-415, December.
    6. John A Doces, 2020. "Democracy, consumption, and growth in sub-Saharan Africa," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 23(1), pages 28-48, March.
    7. 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.
    8. Hibrahim Limi Kouotou & Boniface Ngah Epo, 2022. "Duration of heads of state in power and economic growth: a Sub-Saharan African tale," Economics Bulletin, AccessEcon, vol. 42(2), pages 1153-1170.
    9. Fabrice Murtin & Romain Wacziarg, 2014. "The democratic transition," Journal of Economic Growth, Springer, vol. 19(2), pages 141-181, June.
    10. Yusuke Narita & Ayumi Sudo, 2021. "Curse of Democracy: Evidence from the 21st Century," Papers 2104.07617, arXiv.org, revised Sep 2021.
    11. T. Tavor & L. D. Gonen & M. Weber & U. Spiegel, 2018. "The Effects of Income Levels and Income Inequalities on Happiness," Journal of Happiness Studies, Springer, vol. 19(7), pages 2115-2137, October.
    12. Sima, Di & Huang, Fali, 2023. "Is democracy good for growth? — Development at political transition time matters," European Journal of Political Economy, Elsevier, vol. 78(C).
    13. Tommaso Nannicini & Roberto Ricciuti, 2010. "Autocratic Transitions and Growth," CESifo Working Paper Series 2967, CESifo.
    14. Cingolani, Luciana & Crombrugghe, Denis de, 2012. "Techniques for dealing with reverse causality between institutions and economic performance," MERIT Working Papers 2012-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    15. Gerring, John & Kingstone, Peter & Lange, Matthew & Sinha, Aseema, 2011. "Democracy, History, and Economic Performance: A Case-Study Approach," World Development, Elsevier, vol. 39(10), pages 1735-1748.
    16. repec:hal:spmain:info:hdl:2441/5m0od0o9jn9pqbdmos7fpt28hg is not listed on IDEAS
    17. Pauline Grosjean & Claudia Senik, 2011. "Democracy, Market Liberalization, and Political Preferences," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 365-381, February.
    18. Pettersson, Jan, 2003. "Democracy, Consolidation and Growth," Research Papers in Economics 2002:16, Stockholm University, Department of Economics, revised 15 Dec 2004.
    19. Ruiz Pozuelo, Julia & Slipowitz, Amy & Vuletin, Guillermo, 2016. "Democracy Does Not Cause Growth: The Importance of Endogeneity Arguments," IDB Publications (Working Papers) 7758, Inter-American Development Bank.
    20. Matteo Cervellati & Alireza Naghavi & Farid Toubal, 2018. "Trade liberalization, democratization, and technology adoption," Journal of Economic Growth, Springer, vol. 23(2), pages 145-173, June.
    21. Hubert Tworzecki, 2019. "Poland: A Case of Top-Down Polarization," The ANNALS of the American Academy of Political and Social Science, , vol. 681(1), pages 97-119, January.

    More about this item

    Keywords

    Democracy; Economic Growth. Cointegration; VAR; and Polity IV;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:56621. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.