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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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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001304.

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Date of creation: 20 Apr 2006
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Handle: RePEc:cla:levrem:122247000000001304
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