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The Political U: New Evidence on Democracy and Income

Author

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  • Campos, Nauro
  • Coricelli, Fabrizio
  • Frigerio, Marco

Abstract

This paper offers new insights into the causal relationship between income and democracy. Its main argument is that this relation is U-shaped and not linear as often stated. Using data from 162 countries spanning 1960-2018, our results indicate that “intermediate†regimes lead to a 20% decline in economic performance vis-à -vis both democracies and autocracies. Moreover, political instability is identified as the key channel explaining these effects. Other potential mechanisms, such as education, investment, and inequality, lack similar empirical support. These findings are robust to alternative estimators, democracy measures and, chiefly, to the use of night-lights instead of GDP per capita.

Suggested Citation

  • Campos, Nauro & Coricelli, Fabrizio & Frigerio, Marco, 2022. "The Political U: New Evidence on Democracy and Income," CEPR Discussion Papers 17551, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17551
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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    2. 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.
    3. Fearon, James D, 2003. "Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
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    Cited by:

    1. Jiekuan Zhang & Yan Zhang, 2023. "Examining the effects of economic growth pressure on green total factor productivity: evidence from China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4309-4337, December.

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    More about this item

    Keywords

    democracy; income; growth; political development; economic development;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F15 - International Economics - - Trade - - - Economic Integration
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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