IDEAS home Printed from https://ideas.repec.org/p/idb/brikps/7758.html
   My bibliography  Save this paper

Democracy Does Not Cause Growth: The Importance of Endogeneity Arguments

Author

Listed:
  • Julia Ruiz Pozuelo
  • Amy Slipowitz
  • Guillermo Vuletin

Abstract

This article challenges recent findings that democracy has sizable effects on economic growth. As extensive political science research indicates that economic turmoil is responsible for causing or facilitating many democratic transitions, the paper focuses on this endogeneity concern. Using a worldwide survey of 165 country-specific democracy experts conducted for this study, the paper separates democratic transitions into those occurring for reasons related to economic turmoil, here called endogenous, and those grounded in reasons more exogenous to economic growth. The behavior of economic growth following these more exogenous democratizations strongly indicates that democracy does not cause growth. Consequently, the common positive association between democracy and economic growth is driven by endogenous democratization episodes (i. e. , due to faulty identification).

Suggested Citation

  • Julia Ruiz Pozuelo & Amy Slipowitz & Guillermo Vuletin, 2016. "Democracy Does Not Cause Growth: The Importance of Endogeneity Arguments," IDB Publications (Working Papers) 7758, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:7758
    as

    Download full text from publisher

    File URL: https://publications.iadb.org/bitstream/handle/11319/7758/Democracy-Does-Not-Cause-Growth-The-Importance-of-Endogeneity-Arguments.pdf?sequence=1
    Download Restriction: no

    References listed on IDEAS

    as
    1. Carlos A Vegh & Guillermo Vuletin, 2014. "The Road to Redemption: Policy Response to Crises in Latin America," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(4), pages 526-568, November.
    2. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    3. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    4. Riera-Crichton, Daniel & Vegh, Carlos A. & Vuletin, Guillermo, 2016. "Tax multipliers: Pitfalls in measurement and identification," Journal of Monetary Economics, Elsevier, vol. 79(C), pages 30-48.
    5. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    6. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," American Economic Review, American Economic Association, vol. 95(2), pages 44-49, May.
    7. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(02), pages 225-248, April.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    9. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
    10. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    11. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    12. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, January.
    13. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
    14. 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.
    15. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    16. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
    17. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    18. repec:cup:apsrev:v:53:y:1959:i:01:p:69-105_00 is not listed on IDEAS
    19. Robert J. Barro, 1997. "Getting It Right: Markets and Choices in a Free Society," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522268, January.
    20. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    21. repec:cup:apsrev:v:89:y:1995:i:04:p:882-897_09 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sam Watson’s journal round-up for 25th February 2019
      by Sam Watson in The Academic Health Economists' Blog on 2019-02-25 12:00:22

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:bla:kyklos:v:71:y:2018:i:4:p:642-666 is not listed on IDEAS

    More about this item

    Keywords

    Democracy; Economic Growth; Productivity; Investment; Constitutions; Financial Crisis; Human rights; Political Parties; Inequality; Human Capital;

    JEL classification:

    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    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:idb:brikps:7758. 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: (Felipe Herrera Library). General contact details of provider: http://edirc.repec.org/data/iadbbus.html .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.