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Democratic Capital: The Nexus of Political and Economic Change

  • Torsten Persson
  • Guido Tabellini

We study the dynamics of economic and political change, theoretically and empirically. Democratic capital measured by a nation's historical experience with democracy, and the incidence of democracy in its neighborhood, appears to reduce exit rates from democracy and raise exit rates from autocracy. Higher democratic capital stimulates growth by increasing the stability of democracies. Heterogeneous effects of democracy induce sorting of countries into political regimes, which helps explain systematic differences between democracies and autocracies. Our results suggest the possibility of a virtuous circle, where accumulation of physical and democratic capital reinforce each other, promoting economic development and consolidation of democracy. (JEL D72, I31, N10, N40, O47)

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Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 1 (2009)
Issue (Month): 2 (July)
Pages: 88-126

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Handle: RePEc:aea:aejmac:v:1:y:2009:i:2:p:88-126
Note: DOI: 10.1257/mac.1.2.88
Contact details of provider: Web page: https://www.aeaweb.org/aej-macro
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  1. Francesco Giavazzi & Guido Tabellini, 2004. "Economic and Political Liberalizations," Levine's Bibliography 122247000000000724, UCLA Department of Economics.
  2. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
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  8. Stephen Morris & Hyun S Shin, 2001. "Global Games: Theory and Applications," Levine's Working Paper Archive 122247000000001080, David K. Levine.
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