Is democracy good for growth? | Development at political transition time matters

• Main Authors: SIMA, Di, HUANG, Fali
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: Democracy; Growth; Economic Development; Institutions; Critical Juncture; Democratization; Modernization; Human Capital; Economics; Growth and Development
• Online Access: https://ink.library.smu.edu.sg/soe_research/2661; https://ink.library.smu.edu.sg/context/soe_research/article/3660/viewcontent/2022_1127_Is_Democracy_Good_for_Growth.pdf
• Institution: Singapore Management University

Is democracy a better political regime for economic prosperity than autocracy? This paper shows that the answer depends on the initial economic development level during the democratic transition when the foundation of institutions was laid. Democracy facilitates growth only in countries that already have adequate development at transition time. These countries are more likely to create and sustain growth-enhancing institutions than others. Without appropriate development, democracy does not improve growth; this applies to about 40% of the third-wave democratized countries. These results are based on a sample of 153 countries in 1960–2010 and robust to various specifications and endogeneity issues.