Estimating the Effects of Democratization in African Countries: A Simultaneous Equations Approach

Abstract

This paper analyzes impacts of democratization in Africa, including effects of improved, property rights on economic growth and of greater political participation on civil violence. Democracy is endogenous to economic growth and other outcomes, which hampers most, empirical analysis. This paper uses a minimum distance simultaneous equations estimation to, account for all endogenous variables while including time and country fixed effects. The method yields a test of fit of the model, which is strong. Results indicate a positive significant effect of property rights institutions on economic growth in the presence of time and country fixed effects. Estimates also show a negative significant effect of political participation on civil violence and, strong effects of aid per capita on both economic growth and civil violence.

Keywords: Democracy, Growth, Institutions, Simultaneous equations, Fixed effects, Africa

JEL Classification: O43, P48