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The democracy and economic growth nexus: Do FDI and government spending matter? Evidence from the Arab world

Nouha Bougharriou, Walid Benayed and Foued Badr Gabsi

No 2018-17, Economics Discussion Papers from Kiel Institute for the World Economy (IfW)

Abstract: The purpose of the paper is to examine the direct and indirect links between democracy and economic growth. To do so, the authors estimate a dynamic panel simultaneous equations model on a sample of 16 Arab countries during the period 2002-2013. This study focuses on two particular channels through which democracy affects growth, namely FDI inflows and public consumption expenditure. The results show that there is no clear relationship between democracy and economic growth in the Arab countries, which confirms the skeptical approach. The ambiguity of this relationship can be explained by the fact that democracy promotes growth indirectly by stimulating FDI inflows and hinders growth by generating higher public consumption expenditure.

Keywords: democracy; economic growth; FDI; government spending; Arab world; dynamic panel simultaneous equations model (search for similar items in EconPapers)
JEL-codes: C3 O40 P16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara and nep-int
Date: 2018
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http://www.economics-ejournal.org/economics/discussionpapers/2018-17
https://www.econstor.eu/bitstream/10419/174896/1/1014426715.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201817

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