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The Impact of Democracy on Economic Growth: Some Evidence from Cross‐National Analysis

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  • Erich Weede

Abstract

It has often been maintained that political democracy has a negative impact on economic growth, particularly in less developed countries. Here, cross‐national regressions of two different growth variables on political democracy and on control variables, based on about 90 nations, are reported for the 1960 to 1979 period. Control variables include GNP per capita, gross domestic investment, school enrollment ratios, and sometimes the military participation ratio. While first results seem to support the notion of a negative growth effect of democracy, closer scrutiny reveals that this effect is no longer significant once the analysis is restricted to (more than 70) LDCs only. While a fairly strong and negative impact of democracy on growth can be demonstrated for nations where government revenue exceeds 20|X% of GDP, elsewhere there is no effect at all. It is not democracy itself that hurts the growth prospects of nations, but the combination of democracy and strong state interference with the economy.

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  • Erich Weede, 1983. "The Impact of Democracy on Economic Growth: Some Evidence from Cross‐National Analysis," Kyklos, Wiley Blackwell, vol. 36(1), pages 21-39, August.
    • Handle: RePEc:bla:kyklos:v:36:y:1983:i:1:p:21-39
    DOI: 10.1111/j.1467-6435.1983.tb02659.x
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    Cited by:

    1. Mishra, Sudhanshu K, 2018. "A Simultaneous Equation Model of Globalization, Corruption, Democracy, Human Development and Social Progress," MPRA Paper 84213, University Library of Munich, Germany.
    2. Helliwell, John F., 1994. "Empirical Linkages Between Democracy and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 24(2), pages 225-248, April.
    3. Abbas Pourgerami, 1988. "The political economy of development: A cross-national causality test of development-democracy-growth hypothesis," Public Choice, Springer, vol. 58(2), pages 123-141, August.
    4. Mishra, SK, 2017. "Are Democratic Regimes Antithetical to Globalization?," MPRA Paper 83321, University Library of Munich, Germany.
    5. Robert Gillanders & Karl Whelan, 2014. "Open For Business? Institutions, Business Environment and Economic Development," Kyklos, Wiley Blackwell, vol. 67(4), pages 535-558, November.
    6. Dennis Ridley, 2021. "Capitalism/Democracy/Rule of Law Interactions and Implications for Entrepreneurship and Per Capita Real Gross Domestic Product Adjusted for Purchasing Power Parity," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(1), pages 384-411, March.
    7. Wadjamsse B. Djezou, 2014. "The Democracy and Economic Growth Nexus: Empirical Evidence from Côte d’Ivoire," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(2), pages 251-266, December.
    8. Colagrossi, Marco & Rossignoli, Domenico & Maggioni, Mario A., 2020. "Does democracy cause growth? A meta-analysis (of 2000 regressions)," European Journal of Political Economy, Elsevier, vol. 61(C).
    9. Joao Tovar Jalles, 2010. "Does democracy foster or hinder growth? Extreme-type political regimes in a large panel," Economics Bulletin, AccessEcon, vol. 30(2), pages 1359-1372.
    10. Robin Grier, 2007. "Losing Ground: Latin American Growth from 1955 to 1999," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 177-203, July.
    11. Dennis Ridley, 2017. "Division of Human Capital Creates Surplus Wealth," Bulletin of Political Economy, Bulletin of Political Economy, vol. 11(1), pages 1-20, June.
    12. Haddad, Lawrence & Oshaug, Arne, 1998. "How does the human rights perspective help to shape the food and nutrition policy research agenda?," Food Policy, Elsevier, vol. 23(5), pages 329-345, October.
    13. Mohtadi, Hamid & Roe, Terry L., 2003. "Democracy, rent seeking, public spending and growth," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 445-466, March.
    14. Dennis Ridley & Aryanne de Silva, 2020. "Game Theoretic Choices Between Corrupt Dictatorship Exit Emoluments and Nation-Building CDR Benefits: Is There a Nash Equilibrium?," The American Economist, Sage Publications, vol. 65(1), pages 51-77, March.
    15. Gupta, Dipak K. & Madhavan, M. C. & Blee, Andrew, 1998. "Democracy, economic growth and political instability: An integrated perspective," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(5), pages 587-611.
    16. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    17. Mohtadi, Hamid & Roe, Terry L., 1997. "Democracy, rent seeking, and growth: Is there a U curve?," Bulletins 7485, University of Minnesota, Economic Development Center.
    18. Brautigam, D., 1991. "Governance and economy : a review," Policy Research Working Paper Series 815, The World Bank.
    19. Zie Ballo, 2018. "Evolution and measurement of formal institutions in Cote D’Ivoire," Working Papers 746, Economic Research Southern Africa.
    20. M. Adnan Kabir & Najib Alam, 2021. "The Efficacy of Democracy and Freedom in Fostering Economic Growth," Emerging Economy Studies, International Management Institute, vol. 7(1), pages 76-93, May.
    21. Stephan Haggard & Robert Kaufman, 1989. "The Politics of Stabdization and Structural Adjustment," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 209-254, National Bureau of Economic Research, Inc.
    22. Dennis Ridley & Abdullah Khan, 2019. "Decoupling Entrepreneurship Capital from Capital Stock," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(1), pages 85-94, June.
    23. Liu, Wai-Man & Ngo, Phong, 2020. "Voting with your feet: Political competition and internal migration in the United States," European Journal of Political Economy, Elsevier, vol. 65(C).
    24. Alessandro Melcarne & Juan S. Mora-Sanguinetti & Rok Spruk, 2021. "Democracy, technocracy and economic growth: evidence from 20 century Spain," Working Papers 2118, Banco de España.
    25. Mehmet Asutay & Noor Zahirah Mohd Sidek, 2021. "Political economy of Islamic banking growth: Does political regime and institutions, governance and political risks matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4226-4261, July.

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