Democracy and Development: The Devil in the Details

Torsten Persson () and Guido Tabellini

No 5499, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Does democracy promote economic development? We review recent attempts to addresses this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic reforms. First, democratizations and economic liberalizations in isolation each induce growth accelerations, but countries liberalizing their economy before extending political rights do better than those carrying out the opposite sequence. Second, different forms of democratic government and different electoral systems lead to different fiscal and trade policies: this might explain why new presidential democracies grow faster than new parliamentary democracies. Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.

Keywords: Democracy; Reform; Growth; Institutions; Difference-in-difference estimations (search for similar items in EconPapers)
JEL-codes: E0 O1 P0 (search for similar items in EconPapers)
Date: 2006-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (252)

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Related works:
Journal Article: Democracy and Development: The Devil in the Details (2006)
Working Paper: Democracy and Development: The Devil in the Details (2006)
Working Paper: Democracy and Development: The Devil in the Details (2006)
Working Paper: Democracy and Development: The Devil in the Details (2006)
Working Paper: Democracy and Development: The Devil in the Details (2006)
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