Democracy and Growth: Global Causal Evidence for Heterogeneous Political Regimes and Economic and Social Policy
DOI:
https://doi.org/10.14456/tresp.2016.7Keywords:
Democracy and growth, Lipset/Aristotle and virtuous cycle, heterogeneous political regimes, simultaneous-equation modellingAbstract
The relationship between democracy and growth is of great importance to development of economic and social wellbeing policy but its directional causality is still generating lively debate conceptually and empirically. The paper introduces a simple simultaneous-equation model of democracy and growth for open economies and uses global data and system estimation to provide new evidence on democracy-growth causality and importantly the effects of different democratic institutions on it for strategic economic and social policy analysis. The findings confirm democracy causes growth globally but this causality is mixed for countries with heterogeneous political regimes. Regimespecific policy is therefore recommended for appropriate decision-making.
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