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Democracy, Economic Growth and the Identification Problem in Macroeconomics

Simon Accorsi O. ()

Working Papers from University of Chile, Department of Economics

Abstract: This article analyzes and deals with the so-called "identification problem" in macroeconomics to study the causal relationships between the type of political regime and the path of medium and long-term economic growth with a time series approach. Taking as a starting point the estimation of an Autoregressive Vector (VAR), the identification problem is presented, and then the solution strategies used in the macroeconomic literature to trace and estimate the consequences of democratic shocks on per capita GDP growth are explained. The article presents novel empirical evidence for the neo-institutionalist literature, exploiting long-term series of the Polity index and GDP per capita. Thus, it is possible to estimate the effects of democratic improvements on economic growth. For the 13 countries analyzed, the results are diverse, so the statement that "democracy does causes growth" must be qualified and put into each country-specific historical context.

Pages: 40 pages
Date: 2022-01
New Economics Papers: this item is included in nep-gro and nep-mac
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