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Do Democracies Grow Faster? Revisiting the Institutions and Economic Performance Debate

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  • Lim, Jamus Jerome
  • Decker, Jessica Henson

Abstract

The recent empirical growth literature has proposed three underlying fundamental determinants of economic growth, namely, physical geography, economic integration, and institutional quality. This paper unpacks the final determinant into both political-economic institutions as well as the primarily political institution of democratic development. Using both cross-sectional and panel datasets, we show that, properly instrumented, there is no evidence that democracies grow faster or slower than non-democracies. This result is in contrast to much of the more recent literature, which tend to find a weakly positive relationship. Political economic institutions, however, remain positive and significant determinants of economic growth, which corroborates much of the empirical evidence in the existing literature.

Suggested Citation

  • Lim, Jamus Jerome & Decker, Jessica Henson, 2007. "Do Democracies Grow Faster? Revisiting the Institutions and Economic Performance Debate," MPRA Paper 6076, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6076
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    File URL: https://mpra.ub.uni-muenchen.de/6076/1/MPRA_paper_6076.pdf
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    References listed on IDEAS

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    1. Mark Gradstein, 2007. "Inequality, democracy and the protection of property rights," Economic Journal, Royal Economic Society, vol. 117(516), pages 252-269, January.
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    Cited by:

    1. Thomas Apolte, 2011. "Democracy and prosperity in two decades of transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 693-722, October.
    2. Tamilina, Larysa & Tamilina, Natalya, 2014. "The impact of formal institutions on social trust formation: A social-cognitive approach," MPRA Paper 63203, University Library of Munich, Germany.
    3. Tamilina, Larysa & Tamilina, Natalya, 2015. "Psychology of Trust: A Three Component Analytical Framework to Explain the Impact of Formal Institutions on Social Trust Formation," MPRA Paper 68647, University Library of Munich, Germany, revised 10 Feb 2015.
    4. Tamilina, Larysa & Tamilina, Natalya, 2013. "Formal Institutions and the Trust Formation Process: A Psychological Approach to Explain the Relationship between Institutions and Interpersonal Trust," MPRA Paper 49812, University Library of Munich, Germany.
    5. Apolte, Thomas & Peters, Heiko, 2009. "Governance, Demokratie und wirtschaftliche Entwicklung in den ehemals sozialistischen Staaten," IÖB-Diskussionspapiere 1/09, University of Münster, Institute for Economic Education.

    More about this item

    Keywords

    Economic growth; institutions; democracy;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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