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Democracy Doesn’t Always Happen Over Night: Regime Change in Stages and Economic Growth

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  • Eberhardt, Markus
  • Boese, Vanessa

Abstract

How substantial are the economic benefits from democratic regime change? We argue that democratisation is not a discrete event but a two-stage process: autocracies first enter into 'episodes' of political liberalization; in the second stage, these episodes either culminate in regime change or not. Failure to account for this chronology and the implicit counterfactual groups risks biased estimates due to selection effects. Adopting a repeated-treatment difference-in-difference implementation, which captures non-parallel trends and selection into treatment, we find that a single event approach substantially underestimates the economic dividends from regime change and, crucially, obscures the permanent growth effect of democratisation.

Suggested Citation

  • Eberhardt, Markus & Boese, Vanessa, 2021. "Democracy Doesn’t Always Happen Over Night: Regime Change in Stages and Economic Growth," CEPR Discussion Papers 16587, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16587
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    More about this item

    Keywords

    Democracy; Growth; Political development; Interactive fixed effects; Difference-in-difference;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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