The Regime Debate Revisted: A Sensitivity Analysis of Democracy's Economic Effect

Abstract

Some studies find that democracy inhibits growth while other studies find that democracy facilitates growth. Which conclusion is correct? To help resolve this debate, a variety of sensitivity analyses is conducted to answer two basic questions. First, why has the literature yielded contradictory results? Secondly, how believable are these results? The existing contradictions can be explained by analysts' choice of time period, with democracy having a negative effect on growth in the 1960s, a positive effect in the 1980s and no effect at all in the 1970s and 1990s. More generally, however, it is shown here that the statistical significance of these findings varies radically depending upon which control variables one utilizes and how one measures both growth and democracy.