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Democratization, Quality of Institutions and Economic Growth

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  • Polterovich, Victor
  • Popov, Vladimir

Abstract

There are two innovations in the paper as compared to the previous literature on democracy and growth. First, we consider not only the level of democracy, but also changes in this level in the 1970s-1990s as measured by increments of Freedom House political rights indices. Second, the distinction is made between democracy and law and order (order based on legal rules); the latter is measured by the rule of law, investors' risk and corruption indices. We discuss two interconnected threshold hypotheses: (1) in countries where law and order is strong enough, democratization stimulates economic growth, whereas in countries with poor law and order democratization undermines growth; (2) if democratization occurs under the conditions of poor law and order (so that illiberal democracy emerges), then shadow economy expands, quality of governance worsens, and macroeconomic policy becomes less prudent. We adduce a number of stylized facts to support our hypotheses. However our econometric findings are mixed: we report results that support the hypotheses as well as regressions that contradict them.

Suggested Citation

  • Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19152
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    Citations

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    Cited by:

    1. Chepel, S. & Bondarenko, K., 2015. "Is the External Labor Migration an Economic Growth Factor: Econometric Analysis and Policy Implications for the CIS Countries," Journal of the New Economic Association, New Economic Association, vol. 28(4), pages 142-166.
    2. Popov, Vladimir, 2011. "Developing new measurements of State institutional capacity," MPRA Paper 32389, University Library of Munich, Germany.
    3. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2007. "Resource Abundance, Political Corruption, and Instability of Democracy," MPRA Paper 19154, University Library of Munich, Germany.
    4. Vladimir Popov, 2010. "Development theories and development experience: half a century journey," Working Papers w0153, Center for Economic and Financial Research (CEFIR).
    5. Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, Center for Economic and Financial Research (CEFIR).
    6. Subhani, Muhammad Imtiaz & Osman, Ms. Amber & Lakhiya, Zubair, 2011. "The Structure and Performance of Economy of Pakistan (Comparative Study between Democratic and Non-Democratic Governments)," MPRA Paper 34732, University Library of Munich, Germany, revised 2011.
    7. Полтерович В. М. & Попов В. В. & Тонис А. С., 2008. "Нестабильность Демократии В Странах, Богатых Ресурсами," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 12(2), pages 176-200.
    8. repec:pje:journl:article15sumi is not listed on IDEAS
    9. Polterovich, V., 2013. "General Social Analysis and Reform Design," Journal of the New Economic Association, New Economic Association, vol. 17(1), pages 185-188.
    10. Popov, Vladimir, 2010. "The Long Road to Normalcy," WIDER Working Paper Series 013, World Institute for Development Economic Research (UNU-WIDER).
    11. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2009. "Концентрация Доходов, Нестабильность Демократии И Экономический Рост
      [Income Concentration, Instability of Democracy and the Economic Growth]
      ," MPRA Paper 27561, University Library of Munich, Germany.
    12. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.
    13. Popov, Vladimir, 2009. "Lessons from the Transition Economies: Putting the Success Stories of the Postcommunist World into a Broader Perspective," WIDER Working Paper Series 015, World Institute for Development Economic Research (UNU-WIDER).
    14. repec:nea:journl:y:2017:i:34:p:12-38 is not listed on IDEAS
    15. Alexander Libman, 2012. "Democracy, size of bureaucracy, and economic growth: evidence from Russian regions," Empirical Economics, Springer, vol. 43(3), pages 1321-1352, December.
    16. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2009. "Instability of Democracy as Resource Curse," MPRA Paper 22069, University Library of Munich, Germany.
    17. Polterovich, V., 2014. "Why Reforms Fail," Journal of the New Economic Association, New Economic Association, vol. 23(3), pages 169-173.
    18. Libman, Alexander, 2008. "Democracy and growth: is the effect non-linear?," MPRA Paper 17795, University Library of Munich, Germany.
    19. Polterovich, Victor & Popov, Vladimir & Tonis, Alexander, 2008. "Mechanisms of Resource Curse, Economic Policy and Growth," MPRA Paper 20570, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic growth; democracy; rule of law;

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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