Democracy, openness and jumps in growth

Gabriele Deana and Andrea Gamba
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Gabriele Deana: Bocconi University and University of Milan - Italy

No 221, KITeS Working Papers from KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy

Abstract: We identify multiple structural breaks in a growth series using the econometric method developed by Bai and Perron (1998, 2003). We then regress the indicator of detected positive and negative breaks on three kinds of explanatory variables: external shocks, institutions and policies. Our results show that a change towards democratization fosters booms. Economic liberalizations act as an insurance against the probability of incurring into a crisis, while moves towards autarky undermine the chances of experiencing booms. We employ program evaluation to isolate single reforms and to assess the importance of reform sequencing: we find that democratization is a driver for growth and subsequent liberalization ensures stability.

Keywords: political liberalization; democracy; economic reform; long-run economic growth (search for similar items in EconPapers)
JEL-codes: E65 O11 O43 (search for similar items in EconPapers)
Pages: pages 52
Date: 2008-07, Revised 2008-07
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-pol
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