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Democracy, Inequality and Economic Development: The Case of Pakistan

  • Amir-ud-Din, Rafi
  • Rashid, Abdul
  • Ahmad, Shabbir

In this paper, we made an attempt to understand the costs and benefits of democracy for economic growth in Pakistan by analyzing the relationship between democracy and its various measures. Using instrumental variables and RALS (rth-order autoregressive least squares) estimation techniques, it is shown that during the period 1972-2005, there is only a tenuous and uncertain relationship between democracy and fiscal policy variables like expenditures, revenues and deficit; whereas democracy has no impact at all on the income inequality. Moreover, we observed that the political rights had a significant negative impact on fiscal expenditures, suggesting that with an increase in political rights, the governing institutes begin to feel themselves more accountable and as such are more circumspect in expenditures.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26935.

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Date of creation: 15 Nov 2008
Date of revision:
Handle: RePEc:pra:mprapa:26935
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  1. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  2. repec:pid:journl:v:37:y:1998:i:4:p:377-397 is not listed on IDEAS
  3. Persson, T. & Roland, G. & Tabellini, G., 1997. "Comparative Politics and Public Finance," Papers 633, Stockholm - International Economic Studies.
  4. Acemoglu, Daron & Robinson, James A, 2002. "The Political Economy of the Kuznets Curve," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 183-203, June.
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  6. 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.
  7. Alberto Alesina & Sule Ozler & Nouriel Roubini & Phillip Swagel, 1992. "Political Instability and Economic Growth," NBER Working Papers 4173, National Bureau of Economic Research, Inc.
  8. Mark Gradstein & Branko Milanovic, 2000. "Does Liberté = Egalité? A Survey of the Empirical Evidence on the Links between Political Democracy and Income Inequality," CESifo Working Paper Series 261, CESifo Group Munich.
  9. repec:pid:journl:v:39:y:2000:i:4:p:807-824 is not listed on IDEAS
  10. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
  11. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  12. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
  13. Francesco Decarolis, 2003. "Economic Effects of Democracy. An Empirical Analysis," Rivista di Politica Economica, SIPI Spa, vol. 93(6), pages 69-116, November-.
  14. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  15. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
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