IDEAS home Printed from
   My bibliography  Save this article

Democracy, Government Spending, and Economic Growth: A Political-Economic Explanation of the Barro-Effect


  • Plumper, Thomas
  • Martin, Christian W


The paper develops a political economic argument for the recently observed inverse u-shaped relation between the level of democracy and economic performance. A model is constructed that shows why and how political participation influences the spending behavior of opportunistic governments that can choose an optimal combination of rents and public goods to attract political support. If the level of democracy remains comparably low, governments rationally choose rents as an instrument to assure political support. With increasing democratic participation, however, rents become an increasingly expensive instrument while the provision of public goods becomes more and more efficient in ensuring the incumbent government's survival in power. As a consequence, an increase in democracy tends to raise growth rates of per capita income. However, the beneficial impact of democracy on growth holds true only for moderate degrees of political participation. If--in semi-democratic countries--political participation increases further, governments have an incentive to over-invest in the provision of public goods. This model allows to derive and test three hypothesis: Firstly, based on a simple endogenous growth model, we empirically substantiate our hypothesis of a non-linear, inverse u-shaped relation between the level of democracy and growth of per capita income. Secondly, we show that the impact of government spending on economic growth is higher in more democratic countries. Thirdly, we demonstrate that the level of democracy and government share of GDP are correlated in a u-shaped manner. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Plumper, Thomas & Martin, Christian W, 2003. "Democracy, Government Spending, and Economic Growth: A Political-Economic Explanation of the Barro-Effect," Public Choice, Springer, vol. 117(1-2), pages 27-50, October.
  • Handle: RePEc:kap:pubcho:v:117:y:2003:i:1-2:p:27-50

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    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:kap:pubcho:v:117:y:2003:i:1-2:p:27-50. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.