Democracy, Technology, and Growth

Posted: 11 Jun 2007  

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Francesco Trebbi

Vancouver School of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2007

Abstract

We explore the question of how political institutions and particularly democracy affect economic growth. Although empirical evidence of a positive effect of democracy on economic performance in the aggregate is weak, we provide evidence that democracy influences productivity growth in different sectors differently and that this differential effect may be one of the reasons of the ambiguity of the aggregate results. We provide evidence that political rights are conducive to growth in more advanced sectors of an economy, while they do not matter or have a negative effect on growth in sectors far away from the technological frontier. One channel of explanation goes through the beneficial effects of democracy and political rights on the freedom of entry in markets. Overall, democracies tend to have much lower entry barriers than autocracies, because political accountability reduces the protection of vested interests, and entry in turn is known to be generally more growth-enhancing in sectors that are closer to the technological frontier. We present empirical evidence that supports this entry explanation.

JEL Classification: H7

Suggested Citation

Aghion, Philippe and Alesina, Alberto F. and Trebbi, Francesco, Democracy, Technology, and Growth (June 2007). Harvard Institute of Economic Research Discussion Paper No. 2138. Available at SSRN: https://ssrn.com/abstract=991833

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
617-495-7730 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Francesco Trebbi

Vancouver School of Economics ( email )

University of British Columbia
6000 Iona Dr.
Vancouver Canada, BC V6T 1L4
Canada

HOME PAGE: http://faculty.arts.ubc.ca/ftrebbi/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Abstract Views
869