Do Democracies Grow Faster? Revisiting the Institutions and Economic Performance Debate

Lim, Jamus Jerome and Decker, Jessica Henson (2007): Do Democracies Grow Faster? Revisiting the Institutions and Economic Performance Debate.

Abstract

The recent empirical growth literature has proposed three underlying fundamental determinants of economic growth, namely, physical geography, economic integration, and institutional quality. This paper unpacks the final determinant into both political-economic institutions as well as the primarily political institution of democratic development. Using both cross-sectional and panel datasets, we show that, properly instrumented, there is no evidence that democracies grow faster or slower than non-democracies. This result is in contrast to much of the more recent literature, which tend to find a weakly positive relationship. Political economic institutions, however, remain positive and significant determinants of economic growth, which corroborates much of the empirical evidence in the existing literature.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth, institutions, democracy
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; P - Economic Systems > P5 - Comparative Economic Systems > P51 - Comparative Analysis of Economic Systems