Safeguarding Economic Growth Amid Democratic Backsliding: The Primacy of Institutions over Innovation

Ran Ben Malka () and Sharon Hadad
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Ran Ben Malka: Department of Economics, Sapir Academic College, D.N. Hof Ashkelon 79165, Israel
Sharon Hadad: Department of Economics, Sapir Academic College, D.N. Hof Ashkelon 79165, Israel

Economies, 2025, vol. 13, issue 8, 1-18

Abstract: This paper investigates how democracy influences economic growth through innovation and institutional quality. Using an augmented Solow growth model and panel-data mediation analysis across 123 countries (2011–2022), we quantify democracy’s impact on GDP per capita. Our results show that institutional quality accounts for 83.3% of democracy’s total effect on economic output, while innovation explains only 16.7%. This study contributes to the literature by distinguishing between institutional and innovation channels in the democracy–growth nexus and provides policy-relevant insights for promoting inclusive economic growth (SDG 8) and building resilient infrastructure and innovation (SDG 9).

Keywords: democratic institutions; innovation; economic growth; mediation analysis; democratic backsliding (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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