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Democratic capital: The nexus of political and economic change

  • Torsten Persson
  • Guido Tabellini

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 IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 308.

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Date of creation: 2006
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Handle: RePEc:igi:igierp:308
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  1. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
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