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Democracy and Growth Reconsidered: Why Economic Performance of New Democracies is not Encouraging


  • Polterovich, Victor
  • Popov, Vladimir


There are two innovations as compared to the previous literature on democratization and growth. First, not only the level of democracy is taken into account, but also changes in this level in the 1970s-1990s as measured by the political rights indices of the Freedom House. Second, the distinction is made between the rule of law and democracy, the rule of law being defined as the ability to ensure order based on legal rules; it is measured by the rule of law, investors’ risk and corruption indices. It is found that democratization in countries with strong rule of law (liberal democracies) stimulates economic growth, whereas in countries with poor rule of law (illiberal democracies) democratization undermines growth. In illiberal democracies institutions are weaker, shadow economy is larger and macroeconomic policy is less prudent.

Suggested Citation

  • Polterovich, Victor & Popov, Vladimir, 2005. "Democracy and Growth Reconsidered: Why Economic Performance of New Democracies is not Encouraging," MPRA Paper 21606, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21606

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    References listed on IDEAS

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    Cited by:

    1. Dmitry A. Veselov, 2015. "Democratization and Barriers to Entry in a Two-Dimensional Voting Model," Documents de travail du Centre d'Economie de la Sorbonne 15004, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Madeeha Gohar Qureshi & Eatzaz Ahmed, 2012. "The Inter-linkages between Democracy and Per Capita GDP Growth: A Cross Country Analysis," PIDE-Working Papers 2012:85, Pakistan Institute of Development Economics.
    3. Vladimir Popov, 2006. "Shock Therapy Versus Gradualism Reconsidered: Lessons From Transition Economies After 15 Years Of Reforms," Working Papers w0068, Center for Economic and Financial Research (CEFIR).
    4. Marek Dabrowski, 2008. "Policy Challenges Faced by Low-Income CIS Economies," CASE Network Studies and Analyses 0375, CASE-Center for Social and Economic Research.

    More about this item


    Economic growth; democracy; rule of law;

    JEL classification:

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


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