The Growth Effect of Democracy: Is it Heterogenous and How Can it Be Estimated?

Tabellini, Guido; Persson, Torsten

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The Growth Effect of Democracy: Is it Heterogenous and How Can it Be Estimated?

INSTITUTIONS AND ECONOMIC PERFORMANCE, E. Helpman, ed., Harvard University Press, May 2007

45 Pages Posted: 12 Jun 2007

See all articles by Guido Tabellini

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Abstract

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular, we find an average negative effect on growth of leaving democracy on the order of −2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel. Heterogenous characteristics of reforming and non-reforming countries appear to play an important role in driving these results.

Keywords: growth, democracy, development, political institutions

JEL Classification: E2, O4

Suggested Citation: Suggested Citation

Tabellini, Guido and Persson, Torsten, The Growth Effect of Democracy: Is it Heterogenous and How Can it Be Estimated?. INSTITUTIONS AND ECONOMIC PERFORMANCE, E. Helpman, ed., Harvard University Press, May 2007, Available at SSRN: https://ssrn.com/abstract=988985