Endogenous Constitutional Democracy Capital and Economic Development

Wei Liang and Heng-Fu Zou ()

Annals of Economics and Finance, 2024, vol. 25, issue 2, 501-549

Abstract: This paper develops a dynamic representative-citizens model that endogenizes the accumulation of both constitutional democracy capital and physical capital. Drawing from Douglass North's seminal works, our model integrates interactions between institutional capital and economic performance, focusing on how changes in institutional frameworks impact economic dynamics. By exploring the reciprocal relationships between democratic institutions and economic variables over time, the model elucidates how democratic structures facilitate economic growth and how economic conditions affect the vitality of democratic governance. It demonstrates that exogenous economic variables significantly influence both democracy and physical capital, while political institutional factors critically shape economic outcomes. This approach highlights the importance of a supportive democratic environment in enhancing capital accumulation and shows how threats to democracy can hinder both democratic integrity and economic development, providing a comprehensive framework to understand the interplay between political systems and economic performance.

Keywords: Democracy Capital; Constitutional Democracy; Liberty; Rule of Law; Property Rights; Institutions; Economic Growth; Development (search for similar items in EconPapers)
JEL-codes: E20 E22 H56 O10 O40 P16 P48 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Endogenous Constitutional Democracy Capital and Economic Development (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2024:v:25:i:2:liangzou

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