Using cross-sectional and pooled data for up to 125 countries over the period from 1960 to 1985, this paper evaluates the two-way linkages between democracy and economic growth. The effects of income on democracy are found to be robust and positive. The effects of several measures of democracy on growth are assessed in a comparative growth framework in which growth of per capita GDP depends negatively on initial income levels, as implied by the convergence hypothesis, and positively on rates of investment in physical and human capital. Adjusting for the simultaneous determination of income and democracy makes the estimated direct effect of democracy on subsequent economic growth negative but insignificant. Allowing for the possible positive indirect effect of democracy on income, flowing through the positive effect of democracy on education and investment, tends to offset the negative direct effect of democracy on economic growth. The general result of the growth analysis is that it is still not possible to identify any systematic net effects of democracy on subsequent economic growth.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4066.
Length: Date of creation: Jun 1994 Date of revision: Publication status: published as British Journal of Political Science, vol. 24, pp. 225-248, April 1994 Handle: RePEc:nbr:nberwo:4066
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Find related papers by JEL classification: F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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