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Mastering Panel Metrics: Causal Impact of Democracy on Growth

Author

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  • Shuowen Chen
  • Victor Chernozhukov
  • Iván Fernández-Val

Abstract

We revisit the panel data analysis of Acemoglu et al. (forthcoming) on the relationship between democracy and economic growth using state-of-the-art econometric methods. We argue that panel data settings are high-dimensional, resulting in estimators to be biased to a degree that invalidates statistical inference. We remove these biases by using simple analytical and sample-splitting methods, and thereby restore valid statistical inference. We find that debiased fixed effects and Arellano-Bond estimators produce higher estimates of the long-run effect of democracy on growth, providing even stronger support for the key hypothesis of Acemoglu et al.

Suggested Citation

  • Shuowen Chen & Victor Chernozhukov & Iván Fernández-Val, 2019. "Mastering Panel Metrics: Causal Impact of Democracy on Growth," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 77-82, May.
    • Handle: RePEc:aea:apandp:v:109:y:2019:p:77-82
    Note: DOI: 10.1257/pandp.20191071
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    Cited by:

    1. Taylor, Alan M. & Dube, Arindrajit & Girardi, Daniele & Jordà , Òscar, 2023. "A Local Projections Approach to Difference-in-Differences Event Studies," CEPR Discussion Papers 18141, C.E.P.R. Discussion Papers.
    2. Emanuele Amodio & Michele Battisti & Antonio Francesco Gravina & Andrea Mario Lavezzi & Giuseppe Maggio, 2023. "School‐age vaccination, school openings and Covid‐19 diffusion," Health Economics, John Wiley & Sons, Ltd., vol. 32(5), pages 1084-1100, May.
    3. Hryshko, Dmytro & Manovskii, Iourii, 2022. "How much consumption insurance in the U.S.?," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 17-33.
    4. Christoph Morosoli & Peter Draper & Andreas Freytag & Sebastian Schuhmann, 2024. "Drivers of Inclusive Development: An Empirical Investigation," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(4), pages 987-1015, August.
    5. Daniel Czarnowske & Amrei Stammann, 2020. "Inference in Unbalanced Panel Data Models with Interactive Fixed Effects," Papers 2004.03414, arXiv.org, revised Jun 2025.
    6. Andrew Mountford, 2025. "Economic Growth Analysis When Balanced Growth Paths May Be Time Varying," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 87(3), pages 477-498, June.
    7. Fontanari, Claudia, 2024. "The role of wages in triggering innovation and productivity: A dynamic exploration for European economies," Economic Modelling, Elsevier, vol. 130(C).
    8. Andrew Chia, 2021. "Automatically Differentiable Random Coefficient Logistic Demand Estimation," Papers 2106.04636, arXiv.org.
    9. Ihsaan Bassier & Arindrajit Dube & Suresh Naidu, 2022. "Monopsony in Movers: The Elasticity of Labor Supply to Firm Wage Policies," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 50-86.
    10. Chernozhukov, Victor & Kasahara, Hiroyuki & Schrimpf, Paul, 2021. "Causal impact of masks, policies, behavior on early covid-19 pandemic in the U.S," Journal of Econometrics, Elsevier, vol. 220(1), pages 23-62.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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