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Democratic Capital: The Nexus of Political and Economic Change

  • Persson, Torsten
  • Tabellini, Guido

We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's historical experience with democracy and by the incidence of democracy in its neighborhood - reduces the exit rate from democracy and raises the exit rate from autocracy. In democracies, a higher stock of democratic capital stimulates growth in an indirect way by decreasing the probability of a sucessful coup. Our results suggest a virtuous circle, where the accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5654.

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Date of creation: May 2006
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Handle: RePEc:cpr:ceprdp:5654
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