Democratic Capital: The Nexus of Political and Economic Change

IGIER Working Paper No. 308

59 Pages Posted: 31 Mar 2006

See all articles by Torsten Persson

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Multiple version iconThere are 3 versions of this paper

Date Written: March 2006

Abstract

We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's historical experience with democracy and by the incidence of democracy in its neighborhood - reduces the exit rate from democracy and raises the exit rate from autocracy. In democracies, a higher stock of democratic capital stimulates growth in an indirect way by decreasing the probability of a successful coup. Our results suggest a virtuous circle, where the accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.

Suggested Citation

Persson, Torsten and Tabellini, Guido, Democratic Capital: The Nexus of Political and Economic Change (March 2006). IGIER Working Paper No. 308, Available at SSRN: https://ssrn.com/abstract=894211 or http://dx.doi.org/10.2139/ssrn.894211

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 8 163066 (Phone)
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London School of Economics & Political Science (LSE)

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
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Guido Tabellini (Contact Author)

Bocconi University - Department of Economics ( email )

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Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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