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Democracy and Economic Growth: A Meta-Analysis

Despite a sizeable theoretical and empirical literature, no firm conclusions have been drawn regarding the impact of political democracy on economic growth. This paper challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy-growth literature. We apply meta-regression analysis to the population of 470 estimates derived from 81 papers on democracy and growth. Using traditional meta-analysis estimators, the bootstrap and clustered data analysis, and Fixed and Random Effects meta-regression models, we derive several robust conclusions. Taking all the available published evidence together, we conclude that democracy does not have a direct impact on economic growth. However, it has robust, significant and positive indirect effects through higher human capital, lower inflation, lower political instability and higher economic freedom. Democracies may also be associated with larger governments. There are also country- and region-specific democracy-growth effects. Overall, democracy’s net effect on the economy does not seem to be detrimental.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2006-04eco.pdf
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2006_04.

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Length: 39 pages
Date of creation: 14 Oct 2006
Date of revision:
Handle: RePEc:dkn:econwp:eco_2006_04
Contact details of provider: Postal: 221 Burwood Highway, Burwood 3125
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Web page: http://www.deakin.edu.au/buslaw/aef/index.php

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