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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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  1. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Democratization and Growth," CEPR Discussion Papers 6987, C.E.P.R. Discussion Papers.
  2. Casey B. Mulligan & Ricard Gil & Xavier Sala-i-Martin, 2004. "Do Democracies Have Different Public Policies than Nondemocracies?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 51-74, Winter.
  3. Guido Tabellini, 2006. "Culture and institutions: economic development in the regions of Europe," Levine's Working Paper Archive 321307000000000466, David K. Levine.
  4. Torsten Persson, 2005. "Forms of Democracy, Policy and Economic Development," NBER Working Papers 11171, National Bureau of Economic Research, Inc.
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  13. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  14. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  15. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
  16. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
  17. Francesco Giavazzi & Guido Tabellini, 2004. "Economic and Political Liberalizations," Working Papers 264, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  18. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
  19. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
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