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Democracy and Development: The Devil in the Details

  • Torsten Persson
  • Guido Tabellini

Does democracy promote economic development? We review recent attempts to address this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends %u2013 in a subtle way %u2013 on the details of democratic reforms. First, democratizations and economic liberalizations in isolation each induce growth accelerations, but countries liberalizing their economy before extending political rights do better than those carrying out the opposite sequence. Second, different forms of democratic government and different electoral systems lead to different fiscal trade policies: this might explain why new presidential democracies grow faster than new parliamentary democracies. Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.

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File URL: http://www.nber.org/papers/w11993.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11993.

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Date of creation: Feb 2006
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Publication status: published as Persson, Torsten and Guido Tabellini. "Democracy and development: The devil in the details." American Economic Review 96 (2006): 319-324.
Handle: RePEc:nbr:nberwo:11993
Note: EFG POL
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  1. Torsten Persson & Guido Tabellini, 2006. "Democratic capital: The nexus of political and economic change," Levine's Bibliography 122247000000001304, UCLA Department of Economics.
  2. Francesco Giavazzi & Guido Tabellini, 2004. "Economic and Political Liberalizations," CESifo Working Paper Series 1249, CESifo Group Munich.
  3. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
  4. Torsten Persson, 2005. "Forms of Democracy, Policy and Economic Development," NBER Working Papers 11171, National Bureau of Economic Research, Inc.
  5. 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.
  6. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
  7. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
  8. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, June.
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