Political Regimes and Economic Growth

Abstract

Does democracy in the political realm foster or hinder economic growth? Our discussion of this question begins with a review of arguments in favor of and against democracy. Then we summarize statistical studies in which political regime is included among determinants of growth and identify some methodological problems entailed in such studies. The conclusion is that social scientists know surprisingly little: our guess is that political institutions do matter for growth, but thinking in terms of regimes does not seem to capture the relevant differences.

Après le déluge: Institutions, the Global Financial Crisis, and Bank Profitability in Transition

“…Based on an analysis of emerging economies, Rodríguez and Santiso (2008) find that banks do indeed prefer, based on their lending patterns, stable emergent democracies (although their analysis neglects the issue of bank profitability). On the other hand, democracies, especially in the throes of a crisis, are prone to fits of populism and bad economics (Przeworski and Limongi 1993), perhaps creating a popular desire for bailouts to save banks in particular (although Rosas (2006) found the opposite, in that democratic regimes tend to rely on bank closures more on average than bank bailouts). In direct relation to bank profitability, populism could also go the other way, as public clamors for additional regulation and policies could directly strike at the bottom line for any one particular bank.…”

Telecommunications liberalization and regulatory governance: lessons from Latin America

“…We make use of Jaggers and Gurr's measure of democracy (1995), which came from the Polity III database. Numerous studies have considered the effect of political (in)stability and property rights on economic growth and accurate ways to ascertain the level of democracy (see, for example, Barro 1996Barro , 1998Clague et al 1996;Haan and Siermann 1995;Helliwell 1994;Przeworski and Limongi 1993;Alesina and Perotti 1996;and Londregan and Poole 1996). Although we should expect a positive relationship, the relationship between measures of democracy and economic growth or reforms is much more complex, so conclusive results may not be possible.…”

Do Democracies Select More Educated Leaders?

“…The focus of that literature has mainly been on whether being a democracy enhances a country's economic performance, particularly growth. Early contributions to the cross-country literature include Przeworski and Limongi (1993) and Barro (1996), who conclude that the correlation between democracy and growth is weak and not robust. However, a recent panel data analysis by Papaioannou and Siourounis (2008) based on within-country estimates of permanent transitions, i.e., those where democracy is consolidated, finds that, on average, democratization is associated with a 0.5 to 1 percentage point increase in the annual growth rate.…”