Wednesday, February 4, 2009

Economic Growth and Democracy

Here is a new contribution to the debate about the economic impacts of democracy. The abstract:
This article challenges cross-sectional findings that democracy has a negligible effect on growth. We employ a new dataset of political transitions during the Third Wave of Democratisation and examine the within effect of democratisation in countries that abandoned autocracy and consolidated representative institutions. The panel estimates imply that on average democratisations are associated with a 1% increase in annual per capita growth. The dynamic analysis reveals that: while during the transition growth is slow, in the medium and long run it stabilises at a higher level. This evidence favours development theories of democratic rule and Friedrich Hayek (1960)s idea that the merits of democracy appear in the long run.
Here is the SSRN link. Here is a link to a free copy (pdf). The authors are Elias Papaioannou and Gregorios Siourounis. Papaioannou won a young economist award for this paper back in 2005 from the European Economic Association. This is also a good example of how long it takes to get a paper published in a top tier economic journal.

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