Democracy-Growth Dynamics for Richer and Poorer Countries
24 Pages Posted: 6 Dec 2015
Date Written: December 2, 2015
We study the empirical relationship between democracy and growth using grid-based panel regression and regime-transition frameworks. Our set-up nests several existing approaches, such as Barro (1996) and Gerring et al. (2005), and reconciles their conflicting messages in a more general model, and we identify the best-fitting discounts and memories. Our main finding is that democracy -- best-modelled as a stock variable -- does cause growth, especially beyond the immediate short-run, by enabling the accumulation of physical, human, social and political capitals. Beyond threshold levels of democratic and economic development, however, there are incentives for de-democratization in order to boost short-run growth at the cost of higher sustained long-run growth.
Keywords: Democracy, Growth, Political Economy
JEL Classification: O00, O40, P16, P26
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