IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v45y2016isp85-107.html
   My bibliography  Save this article

Democracy and growth: Evidence from a machine learning indicator

Author

Listed:
  • Gründler, Klaus
  • Krieger, Tommy

Abstract

We present a novel approach for measuring democracy based on Support Vector Machines, a mathematical algorithm for pattern recognition. The Support Vector Machines Democracy Index (SVMDI) is continuous on the [0,1] interval and enables very detailed and sensitive measurement of democracy for 185 countries in the period between 1981 and 2011. Application of the SVMDI yields results which highlight a robust positive relationship between democracy and economic growth. We argue that the ambiguity in recent studies mainly originates from the lack of sensitivity of traditional democracy indicators. Analyzing transmission channels through which democracy exerts its influence on growth, we conclude that democratic countries feature better educated populations, higher investment shares, and lower fertility rates, but not necessarily higher levels of redistribution.

Suggested Citation

  • Gründler, Klaus & Krieger, Tommy, 2016. "Democracy and growth: Evidence from a machine learning indicator," European Journal of Political Economy, Elsevier, vol. 45(S), pages 85-107.
    • Handle: RePEc:eee:poleco:v:45:y:2016:i:s:p:85-107
    DOI: 10.1016/j.ejpoleco.2016.05.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176268016300222
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejpoleco.2016.05.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    2. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    3. Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, vol. 10(3), pages 273-296, September.
    4. Daniel Halter & Manuel Oechslin & Josef Zweimüller, 2014. "Inequality and growth: the neglected time dimension," Journal of Economic Growth, Springer, vol. 19(1), pages 81-104, March.
    5. Feng, Yi, 1997. "Democracy, Political Stability and Economic Growth," British Journal of Political Science, Cambridge University Press, vol. 27(3), pages 391-418, July.
    6. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    7. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    8. Giavazzi, Francesco & Tabellini, Guido, 2005. "Economic and political liberalizations," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1297-1330, October.
    9. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    10. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    11. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    12. Keith Jaggers & Ted Robert Gurr, 1995. "Tracking Democracy's Third Wave with the Polity III Data," Journal of Peace Research, Peace Research Institute Oslo, vol. 32(4), pages 469-482, November.
    13. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    14. Thomas Apolte, 2011. "Democracy and prosperity in two decades of transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 693-722, October.
    15. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    16. Sanderson, Eleanor & Windmeijer, Frank, 2016. "A weak instrument F-test in linear IV models with multiple endogenous variables," Journal of Econometrics, Elsevier, vol. 190(2), pages 212-221.
    17. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    18. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    19. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
    20. Fabrice Murtin & Romain Wacziarg, 2014. "The democratic transition," Journal of Economic Growth, Springer, vol. 19(2), pages 141-181, June.
    21. Robert J. Barro, 2013. "Education and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 301-328, November.
    22. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    23. Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
    24. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    25. Lars Feld & Jan Schnellenbach, 2014. "Political institutions and income (re-)distribution: evidence from developed economies," Public Choice, Springer, vol. 159(3), pages 435-455, June.
    26. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    27. Oechslin, Manuel & Halter, David, 2010. "Inequality and Growth: The Neglected Time Dimension," CEPR Discussion Papers 8033, C.E.P.R. Discussion Papers.
    28. Jain, Rishee K. & Smith, Kevin M. & Culligan, Patricia J. & Taylor, John E., 2014. "Forecasting energy consumption of multi-family residential buildings using support vector regression: Investigating the impact of temporal and spatial monitoring granularity on performance accuracy," Applied Energy, Elsevier, vol. 123(C), pages 168-178.
    29. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    30. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    31. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    32. Acemoglu, Daron & Johnson, Simon & Robinson, James A. & Yared, Pierre, 2009. "Reevaluating the modernization hypothesis," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1043-1058, November.
    33. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    34. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    35. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    36. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    37. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
    38. Filipe R. Campante & Davin Chor, 2012. "Why Was the Arab World Poised for Revolution? Schooling, Economic Opportunities, and the Arab Spring," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 167-188, Spring.
    39. repec:hal:spmain:info:hdl:2441/5m0od0o9jn9pqbdmos7fpt28hg is not listed on IDEAS
    40. Alessandro Lizzeri & Nicola Persico, 2004. "Why did the Elites Extend the Suffrage? Democracy and the Scope of Government, with an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 707-765.
    41. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    42. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    43. Ragin, Charles C., 2000. "Fuzzy-Set Social Science," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226702773, December.
    44. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    45. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    46. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    47. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    48. Robert J. Barro, 2003. "Determinants of Economic Growth in a Panel of Countries," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 231-274, November.
    49. Pemstein, Daniel & Meserve, Stephen A. & Melton, James, 2010. "Democratic Compromise: A Latent Variable Analysis of Ten Measures of Regime Type," Political Analysis, Cambridge University Press, vol. 18(4), pages 426-449.
    50. Shawn Treier & Simon Jackman, 2008. "Democracy as a Latent Variable," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 201-217, January.
    51. 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.
    52. Madsen, Jakob B. & Raschky, Paul A. & Skali, Ahmed, 2015. "Does democracy drive income in the world, 1500–2000?," European Economic Review, Elsevier, vol. 78(C), pages 175-195.
    53. World Bank, 2014. "World Development Indicators 2014," World Bank Publications - Books, The World Bank Group, number 18237.
    54. Tay, Francis E. H. & Cao, Lijuan, 2001. "Application of support vector machines in financial time series forecasting," Omega, Elsevier, vol. 29(4), pages 309-317, August.
    55. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2013. "Democracy, Redistribution and Inequality," NBER Working Papers 19746, National Bureau of Economic Research, Inc.
    56. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    57. repec:ucp:bkecon:9780226702766 is not listed on IDEAS
    58. Tatu Vanhanen, 2000. "A New Dataset for Measuring Democracy, 1810-1998," Journal of Peace Research, Peace Research Institute Oslo, vol. 37(2), pages 251-265, March.
    59. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    60. Burkhart, Ross E. & Lewis-Beck, Michael S., 1994. "Comparative Democracy: The Economic Development Thesis," American Political Science Review, Cambridge University Press, vol. 88(4), pages 903-910, December.
    61. Frederick Solt, 2016. "The Standardized World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 97(5), pages 1267-1281, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gründler, Klaus & Scheuermeyer, Philipp, 2015. "Income inequality, economic growth, and the effect of redistribution," W.E.P. - Würzburg Economic Papers 95, University of Würzburg, Department of Economics.
    2. Gründler, Klaus & Scheuermeyer, Philipp, 2018. "Growth effects of inequality and redistribution: What are the transmission channels?," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 293-313.
    3. Andrew Berg & Jonathan D. Ostry & Charalambos G. Tsangarides & Yorbol Yakhshilikov, 2018. "Redistribution, inequality, and growth: new evidence," Journal of Economic Growth, Springer, vol. 23(3), pages 259-305, September.
    4. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    5. Gründler, Klaus, 2015. "The vanishing effect of finance on growth," Discussion Paper Series 133, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    6. Kotschy, Rainer & Sunde, Uwe, 2017. "Democracy, inequality, and institutional quality," European Economic Review, Elsevier, vol. 91(C), pages 209-228.
    7. Kammas, Pantelis & Sarantides, Vassilis, 2019. "Do dictatorships redistribute more?," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 176-195.
    8. Sima, Di & Huang, Fali, 2023. "Is democracy good for growth? — Development at political transition time matters," European Journal of Political Economy, Elsevier, vol. 78(C).
    9. Jorge Braga Macedo & Joaquim Oliveira Martins & João Tovar Jalles, 2021. "Globalization, Freedoms and Economic convergence: an empirical exploration of a trivariate relationship using a large panel," International Economics and Economic Policy, Springer, vol. 18(3), pages 605-629, July.
    10. Breunig, Robert & Majeed, Omer, 2020. "Inequality, poverty and economic growth," International Economics, Elsevier, vol. 161(C), pages 83-99.
    11. Klaus Gründler & Tommy Krieger, 2019. "Should We Care (More) About Data Aggregation? Evidence from Democracy Indices," CESifo Working Paper Series 7480, CESifo.
    12. Max Kohler & Stefan Sperlich & Jisu Yoon, 2019. "A Varying Coefficient Model for Assessing the Returns to Growth to Account for Poverty and Inequality," Papers 1903.02390, arXiv.org.
    13. Islam, Md. Rabiul & McGillivray, Mark, 2020. "Wealth inequality, governance and economic growth," Economic Modelling, Elsevier, vol. 88(C), pages 1-13.
    14. José Carlos Coelho & José Alves, 2021. "How inequality drives growth: an investigation of the transmission channels for OECD countries," Working Papers REM 2021/0194, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    15. Gustavo A. Marrero & Luis Servén, 2022. "Growth, inequality and poverty: a robust relationship?," Empirical Economics, Springer, vol. 63(2), pages 725-791, August.
    16. Seher Gülşah Topuz, 2022. "The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1177-1231, August.
    17. Gründler, Klaus & Köllner, Sebastian, 2017. "Determinants of governmental redistribution: Income distribution, development levels, and the role of perceptions," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 930-962.
    18. Daniel Halter & Manuel Oechslin & Josef Zweimüller, 2014. "Inequality and growth: the neglected time dimension," Journal of Economic Growth, Springer, vol. 19(1), pages 81-104, March.
    19. Zuazu, Izaskun, 2019. "The growth effect of democracy and technology: An industry disaggregated approach," European Journal of Political Economy, Elsevier, vol. 56(C), pages 115-131.
    20. Méon, Pierre-Guillaume & Sekkat, Khalid, 2022. "A time to throw stones, a time to reap: how long does it take for democratic transitions to improve institutional outcomes?," Journal of Institutional Economics, Cambridge University Press, vol. 18(3), pages 429-443, June.

    More about this item

    Keywords

    Democracy; Economic growth; Panel data; Machine learning; Support Vector Machines;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:45:y:2016:i:s:p:85-107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.