The political economy of development: A cross-national causality test of development-democracy-growth hypothesis

Abbas Pourgerami

Public Choice, 1988, vol. 58, issue 2, 123-141

Abstract: The empirical investigation of the development-democracy-growth hypothesis estimates positive correlations and causal associations between development and democracy and democracy and growth. Among the preconditions for the emergence of DEMOCRACY, MARKET and CULTURE show strong and highly significant positive effects which are largely transmitted directly. DEVELOPMENT affects DEMOCRACY directly and indirectly via EDUCATION and INVESTMENT. The positive causal association between DEMOCRACY and GROWTH is transmitted both directly and indirectly via LABOR and WELFARE. Accordingly, the hypothesized compatibility between economic development and political democracy is confirmed, while rejecting the trade-off between political democracy and economic growth. The developmental implications of these findings emphasize a need for continuous efforts on the part of governments and people to initiate and/or accelerate a process of establishing preconditions for the emergence of democracy via improvements in the allocative role of markets, enrichment of cultural values in such a way that more diversity and compromise are tolerated in the decision making processes, and betterment of the standard of living by investment in human and physical capital. The establishment of a genuine democracy and expansion of individual freedom will enable the people to actively participate in the development process in order to continuously improve the quality of life for the entire population. Copyright Kluwer Academic Publishers 1988

Date: 1988
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DOI: 10.1007/BF00125718

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