Democracy Versus Dictatorship? The Political Determinants of Growth Episodes

Abstract

In contrast to previous literature, which looks at the effect of democracy on long-run growth or short-run volatility of growth, we examine the effect of political institutions on medium-term growth episodes. These are episodes of accelerations and decelerations that characterise the growth experience of most developing countries. We find that the effect of political institutions on growth is asymmetric across accelerations and decelerations, and that democracies do not necessarily outperform autocracies in a growth acceleration episode, though they are likely to prevent large growth collapses. When we disaggregate the type of autocracy, we find that party-based autocracies outperform democracies in growth acceleration episodes, though they do not limit the fall in the magnitude in growth deceleration episodes in comparison to democracies.

Keywords: Political institutions, economic growth, growth episodes, democracy, autocracy