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Does Democracy Facilitate Economic Growth Or Does Economic Growth Facilitate Democracy? An Empirical Study Of Sub-Saharan Africa

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  • Paresh Narayan
  • Seema Narayan
  • Russell Smyth

Abstract

This paper examines the relationship between democracy and economic growth in 30 Sub-Saharan African countries. As our proxy for democracy we first use the democracy index constructed by Freedom House and then check the sensitivity of our findings using, as an alternative proxy for democracy, the Legislative Index of Electoral Competitiveness (LIEC). We find support for the Lipset hypothesis - in the long run, real GDP Granger causes democracy and an increase in GDP results in an improvement in democracy – in Botswana and Niger with both datasets, for Chad with the Freedom House data only and for Cote d’Ivoire and Gabon with the LIEC data only. Support for the compatibility hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a positive effect on real income - is found for Botswana with the Freedom House data and for Madagascar, Rwanda, South Africa and Swaziland with the LIEC data. Support for the conflict hypothesis - in the long run democracy Granger causes real income and an increase in democracy has a negative effect on real income - is found for Gabon with the Freedom House data and Sierra Leone with the LIEC data.

Suggested Citation

  • Paresh Narayan & Seema Narayan & Russell Smyth, 2007. "Does Democracy Facilitate Economic Growth Or Does Economic Growth Facilitate Democracy? An Empirical Study Of Sub-Saharan Africa," Monash Economics Working Papers 10-07, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2007-10
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    References listed on IDEAS

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    More about this item

    Keywords

    Causality; Democracy; Economic Growth; Sub-Saharan Africa.;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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