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Economic Growth and Democracy in Africa: Revisiting the Feldstein-Horioka Puzzle

Published online by Cambridge University Press:  12 November 2006

Emizet F. Kisangani
Emizet F. Kisangani
Affiliation:
Kansas State University
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Abstract

Abstract. The debate on the relationship between economic performance (sustained economic growth, saving and investment) and democracy remains unsettled. This article provides a critical review of the arguments by relying on the Feldstein-Horioka puzzle. A generalized method of moments (GMM) using 37 African countries from 1960 to 1998 reveals a close relationship among indicators of economic performance but no relationship between economic performance and democracy. Co-integration and vector error correction models contradict GMM results, however. Democracy fosters investment in eight countries, enhances saving in three other countries and sustains economic growth in five. Therefore, single country analyses using appropriate methodologies seem warranted to avoid putting forth ecological fallacies with detrimental policy implications.

Résumé. Le débat sur la relation entre performance économique (croissance économique soutenue, épargne et investissement) et démocratie est encore loin d'être clos. Cet article fait une analyse critique des thèses en présence en se basant sur le paradoxe de Feldtsein-Horioka. L'analyse de 37 pays africains de 1960 à 1998 utilisant la méthode des moments généralisée (MMG) démontre un lien étroit entre les divers indicateurs de performance économique, mais aucun lien entre ceux-ci et la démocratie. Cependant, la cointégration et les modèles vectoriels à correction d'erreurs contredisent les résultats basés sur la MMG. En effet, la démocratie favorise l'investissement dans huit pays, encourage l'épargne dans trois autres pays, et soutient la croissance économique dans cinq pays. Il semble justifié, par conséquent, de recourir à des analyses individuelles par pays utilisant des méthodologies appropriées pour éviter des erreurs écologiques aux répercussions néfastes sur la politique économique.

Type
Research Article
Information
Canadian Journal of Political Science/Revue canadienne de science politique , Volume 39 , Issue 4 , December 2006 , pp. 855 - 881
Copyright
© 2006 Cambridge University Press

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