BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
Democracy and growth: An alternative empirical approach
Abstract: This paper proposes a “before-and-after” approach to
empirical examination of the relationship between democracy and growth.
Rather than the commonly used cross-country regression method, this paper
compares the economic performances of forty countries before and after they
became democracies or semi-democracies sometime within the last forty
years. The empirical evidence indicates that an improvement in growth
performance typically follows the transformation to democracy. Moreover,
growth under democracy appears to be more stable than under authoritarian
regimes. Interestingly, wealthy countries often experience declines in
growth after a democratic transformation, while very poor nations typically
experience accelerations in growth. Growth change appears to be negatively
related to the initial savings ratio and positively related to the export
ratio to GDP. Partial correlation between growth change and primary school
or secondary school enrollments and the ratio of government expenditure to
GDP is not identified.
Keywords: democracy; economic growth; (follow links to similar papers)
JEL-Codes: O40; O57; (follow links to similar papers)
32 pages, November 12, 2002
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