Democratization and Economic Prosperity

Abstract

What explains cross-national variation in economic prosperity? One line of ongoing research explores whether political institutions associated with democracy are important determinants. Devising accurate tests of this relationship is non-trivial; while the timing of democratic transitions is arguably stochastic, the process by which countries adopt democratic political practices may be endogenous to economic outcomes. We identify the eect of democratization by comparing the economic output of democratized units with the output of synthetic counterfactuals of these same units under a condition of no democratic transition. We focus on reforms that took place in Africa in the 1990s using balanced panel data for the period 1975-2008. Our empirical approach yields an unbiased estimate (in expectation) of the effect of democratization for each individual treated unit under relatively modest assumptions. We find that, in the African context, formal democratization has highly heterogeneous but substantive effects on economic prosperity.

Keywords: Africa, democratization, economic output, heterogeneous effects