Political Democracy and Economic Growth: Pooled Cross-Sectional and Time-Series Evidence

Abstract

Interest in the relationship between political democracy and economic growth has been long-standing.See, for example, S. M. Lipset, ‘Some Social Requisites of Democracy: Economic Development and Political Legitimacy’, American Political Science Review, 53 (1959), 69–105. Recently this work has been reanalysed b y J. Helliwell, ‘Empirical Linkages between Democracy and Economic Growth’, British Journal of Political Science, 24 (1994), 225–48; and by R. Burkhart and M. Lewis Beck, ‘Comparative Democracy: The Economic Development Th esis,’ American Political Science Review, 88 (1994), 903–10. Recently, there has been an explosion of empirical research emanating from political science and economics that once again attempts to understand the relationship between democracy and economic growth. The goal in much of this research has been to explain the variation in per capita growth rates that exists across nations. This goal has translated into a straightforward empirical mod elling strategy: regress a country's growth rate on a democracy variable and a number of control variables and see whether the partial correlation between democracy and economic growth is statistically significant. The last few years has seen the publicat ion of over twenty empirical studies; however, the results are far from conclusive. In their recent review of twenty-one statistical findings investigating this relationship, Przeworski and Limongi explain that ‘eight found in favor of democracy, eight in favor of authoritarianism, and five discovered no difference.’ Of the thirteen studies surveyed by Sirowy and Inkeles, three find a negative effect of democracy on economic growth, four find this negative effect in some situations, and six find no relationship whatsoever.See A. Przeworski and F. Limongi, ‘Political Regimes and Economic Growth’, Journal of Economic Perspectives, 7 (1993), 1002–37; and L. Sirowy and A. Inkeles, ‘The Effects of Democracy on Economic Growth and Inequality: A Review,’ Studies in Comparative International Development, 25 (1990), 126–57. See also R. Levine and D. Renelt, ‘Cross-Country Studies of Growth and Policy: Methodological, Conceptual, and Statistical Problems’ (World Bank Working Paper, No. 608, Washington, DC, 1991). These conclusions are far from reassuring or instructive.