Democracy and economic growth: How regional context influences regime effects

British Journal of Political Science

Volumn 36, Issue 2, 2006, Pages 317-340

  Krieckhaus, Jonathan ^a  

^a UNIVERSITY OF MISSOURI   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33644882520     PISSN: 00071234     EISSN: 14692112     Source Type: Journal    
DOI: 10.1017/S0007123406000172     Document Type: Article

References (91)

1. Fully forty-eight studies are reviewed in Charles Kurzman, Regina Werum and Ross E. Burkhart, 'Democracy's Effect on Economic Growth: A Pooled Time-Series Analysis, 1951-1980', Studies in Comparative International Development, 37 (2002), 3-33.
2. For good literature reviews, see Larry Sirowy and Alex Inkeles, 'The Effects of Democracy on Economic Growth and Inequality: A Review', Studies in Comparative International Development, 25 (1990), 126-57;
3. Adam Przeworski and Fernando Limongi, 'Political Regimes and Economic Growth', Journal of Economic Perspectives, 7 (1993), 51-69.
4. Prominent examples include John F. Helliwell, 'Empirical Linkages between Democracy and Economic Growth', British Journal of Political Science, 24 (1994), 225-48;
5. Adam Przeworski, Michael E. Alvarez and José Antonio Cheibub, Democracy and Development: Political Institutions and Well-Being in the World, 1950-1990 (Cambridge: Cambridge University Press, 2000).
6. Samuel H. Huntington, Political Order in Changing Societies (New Haven, Conn.: Yale University Press, 1968).
7. Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, Conn.: Yale University Press, 1982).
8. Olson, The Rise and Decline of Nations, p. 77.
9. Przeworski and Limongi, 'Political Regimes and Economic Growth'.
10. Douglas North, Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990).
11. Bruce Bueno de Mesquita, James D. Morrow, Randolph Siverson and Alastair Smith, 'Political Competition and Economic Growth', Journal of Democracy, 12 (2001), 58-72.
12. Mancur Olson, 'Dictatorship, Democracy, and Development', American Political Science Review, 87 (1993), 567-76;
13. Przeworski and Limongi, 'Political Regimes and Economic Growth'. While electoral control over politicians is probably the most fundamental economic defence of democracy, some emphasize as well democracy ' s positive microeconomic effects - facilitating information transfer and generating a stable investment climate.
14. For a review, see Sirowy and Inkeles, 'The Effects of Democracy on Economic Growth and Inequality'.
15. Jeffrey D. Sachs, 'Social Conflict and Populist Policies in Latin America', NBER Working Paper No. 2897, Cambridge, Mass., 1989;
16. Rudiger Dornbusch and Sebastian Edwards, eds, The Macroeconomics of Populism in Latin America (Chicago: University of Chicago Press, 1991).
17. Kelley Hoffman and Miguel Angel Centeno, 'The Lopsided Continent: Inequality in Latin America', Annual Review of Sociology, 29 (2003), 363-90, p. 365.
18. Robert Kaufman and Barbara Stallings, 'The Political Economy of Latin American Populism', in Rudiger Dornbusch and Sebastian Edwards, eds, The Macroeconomics of Latin American Populism (Chicago: University of Chicago Press, 1991);
19. Sachs, 'Social Conflict and Populist Policies in Latin America'.
20. Guillermo A. O'Donnell, Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics (Berkeley, Calif: Institute of International Studies, 1973);
21. David Collier, ed., The New Authoritarianism in Latin America (Princeton, N.J.: Princeton University Press, 1979).
22. Barbara Stallings and Robert Kaufman, eds, Debt and Democracy in Latin America (Boulder, Colo.: Westview Press, 1989).
23. Karen L. Remmer, 'Democracy and Economic Crisis: The Latin American Experience', World Politics, 42 (1990), 315-35.
24. Karen L. Remmer, 'The Political Economy of Elections in Latin America, 1980-1991', American Political Science Review, 87 (1993), 393-407.
25. The developmental state literature is enormous. Prominent examples include Alice H. Amsden, Asia's Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989);
26. Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, N.J.: Princeton University Press, 1990);
27. Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, N.J.: Princeton University Press, 1995).
28. World Bank, The East Asian Miracle: Economic Growth and Public Policy (Oxford: Oxford University Press, 1993);
29. Evans, 'Embedded Autonomy'.
30. Bruce Cumings, 'The Origins and Development of the Northeast Asian Political Economy: Industrial Sectors, Product Cycles, and Political Consequences', International Organization, 38 (1984), 1-40;
31. David C. Kang, Crony Capitalism: Corruption and Development in South Korea and the Philippines (Cambridge: Cambridge University Press, 2002).
32. Anne O. Krueger, The Development of the Foreign Sector and Aid, Studies in the Modernization of the Republic of Korea: 1945-1975 (Cambridge, Mass.: Harvard University Press, 1979);
33. Stephan Haggard, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N.Y.: Cornell University Press, 1990).
34. Wade, Governing the Economy.
35. Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 (Stanford, Calif.: Stanford University Press, 1982);
36. Chalmers Johnson, 'Political Institutions and Economic Performance: The Government-Business Relationship in Japan, South Korea, and Taiwan', in Frederic C. Deyo, ed., The Political Economy of the New East Asian Industrialism (Ithaca, N.Y.: Cornell University Press, 1987).
37. Frederic C. Deyo, Beneath the Miracle: Labor Subordination in the New Asian Industrialism (Berkeley: University of California Press, 1989);
38. Stephan Haggard, 'Politics and Institutions in the World Bank's East Asia', in Robert Wade et al., Miracle or Design: Lessons from the East Asian Experience (Washington, D.C. : Overseas Development Council, Policy Essay No. 11, 1994), pp. 98-105.
39. Amsden, Asia's Next Miracle;
40. Evans, Embedded Autonomy.
41. Pranab Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984).
42. The norm in African studies is to view Sub-Saharan Africa as a distinct political context, and to relegate Mediterranean Africa to another category of analysis. I follow this tradition and use the term 'Africa' to refer solely to Sub-Saharan Africa.
43. Michael Bratton and Nicolas van de Walle, Democratic Experiments in Africa: Regime Transitions in Comparative Perspective (Cambridge: Cambridge University Press, 1997), p. 63.
44. Bratton and van de Walle, Democratic Experiments in Africa, p. 62, emphasis in original.
45. Evans, Embedded Autonomy.
46. See, for instance, Richard Sandbrook, The Politics of Africa's Economic Stagnation (Cambridge: Cambridge University Press, 1985);
47. Bratton and van de Walle, Democratic Experiments;
48. Nicolas van de Walle, African Economies and the Politics of Permanent Crisis, 1979-1999 (Cambridge: Cambridge University Press, 2001).
49. See, forinstance, the studies reviewed in Kurzman, Werum and Burkhart, 'Democracy's Economic Effects'.
50. William Easterly, 'The Lost Decades: Developing Countries' Stagnation in Spite of Policy Reform, 1980-1998', Journal of Economic Growth, 6 (2001), 135-57, emphasizes this stark rupture around 1980, noting that the median rate of economic growth in developing countries fell to 0.0 per cent in the two decades after 1980.
51. Kurzman, Werum and Burkhart, 'Democracy's Economic Effects'.
52. Nathaniel Beck and Jonathan N. Katz, 'What do Do (and Not do Do) with Time-Series-Cross-Section Data in Comparative Polities', American Political Science Review, 89 (1995), 634-47.
53. The Im-Pesaran-Shin test and the Levin-Lin-Chu both reject the hypothesis of non-stationarity. Kyung So Im and M. Hashem Pesaran, 'Testing for the Unit Roots in Heterogenous Panels', Journal of Econometrics, 115 (2003), 53-74;
54. Andrew Levin, Chien-Fu Lin and Chia-Shang James Chu, 'Unit Root Tests in Panel Data: Asymtotic and Finite Sample Properties', Journal of Econometrics, 108 (2002), 1-24.
55. Wooldridge tests confirm the presence of auto-correlation (see J. M. Wooldridge, Econometric Analysis of Cross-Section and Panel Data (Cambridge, Mass.: MIT Press, 2002)). All AR(1) corrections were panel-specific. The AR(1) process is a better way to correct autocorrelation than a lagged dependent variable, both because there is no theoretical reason to believe that lagged growth in one period should influence lagged growth in another period, and because leaving out lagged growth provides a better test of what we want to know, namely the effect of democracy on average growth, rather than the effect of democracy on the change in growth across periods. Practically, however, it does not matter which technique is used to correct for autocorrelation given that all regime effects reported in Tables 2 and 3 were also statistically significant after including a lag of the dependent variable (results available from author upon request).
56. See David Leblang, 'Political Democracy and Economic Growth: Pooled Cross-Sectional and Time-Series Evidence', British Journal of Political Science, 27 (1997), 453-72, for previous use of period-dummies in pooled analyses of regime effects. To conserve space, the coefficients for time dummies are not reported in the tables but are available from the author upon request.
57. See, for instance, Leblang, 'Political Democracy and Economic Growth';
58. Kurzman, Werum and Burkhart, 'Democracy's Economic Effects'.
59. For a discussion of the strengths and weaknesses of various indices of democracy, see Gerardo C. Munck and Jay Verkuilen, 'Conceptualizing and Measuring Democracy: Evaluating Alternative Indices', Comparative Political Studies, 35 (2002), 5-34.
60. Robert Barro, Determinants of Economic Growth: A Cross-Country Empirical Study (Cambridge, Mass.: MIT Press, 1997).
61. Barro, Determinants of Economic Growth. The education attainment data is not available for the year 1995, so for TSCS this data is extrapolated from previous periods. The same is done for the years 1990 and 1995 for the education enrolment data used in Tables 8 and 9.
62. Barro, Determinants of Economic Growth.
63. Gary Becker, Kevin Murphy and Tamura Robert, 'Human Capital, Fertility, and Economic Growth', Journal of Political Economy, 98 (1990) Special Issue, S12-37.
64. Jeffrey Sachs and Andrew M. Warner, 'Sources of Slow Growth in African Economies', Journal of African Economies, 6 (1997), 335-76.
65. Stephen Knack and Philip Keefer, 'Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures', Economics and Politics, 1 (1995), 207-28.
66. Michael Bleaney and Akira Nishiyama, 'Explaining Growth: A Contest between Models', Journal of Economic Growth, 1 (2002), 43-56, p. 44.
67. Gary King, Robert O. Keohane and Sidney Verba, Designing Social Inquiry: Scientific Inference in Qualitative Research (Princeton, N.J.: Princeton University Press, 1994), p. 78.
68. Przeworski and Limongi, 'Political Regimes and Economic Growth', note this frequently overlooked point, namely that if we control for investment then the coefficient on democracy reflects only the economic efficiency with which a given amount of investment is utilized.
69. William Easterly and Ross Levine, 'Africa's Growth Tragedy: Policies and Ethnic Divisions', Quarterly Journal of Economics, 112 (1997), 1203-50;
70. Bleaney and Nishiyama, 'Explaining Growth'.
71. Sachs and Warner, 'Sources of Slow Growth in African Economies';
72. Bleaney and Nishiyama, 'Explaining Growth'.
73. An alternative demarcation point could be the year 1982, when Mexico defaulted on its international debt and triggered the Third World debt crisis. I therefore re-ran the models in columns 2 and 3 for Tables 2-9 using slightly different periods, namely 1960-82 and 1982-2000. All of the findings that are significant in those tables remain significant at p < 0.05 with a one-tailed test using this alternative demarcation point (results available from author upon request).
74. 2 between growth in 1960-1980 and growth in 1980-2000 is 0.12 for the full sample, 0.00 for Africa, and 0.15 for Latin America and Asia. Growth in the second period is not merely a 'replication' of growth in the first period.
75. See, for example, Leblang, 'Political Democracy and Economic Growth';
76. Przeworski et al., Democracy and Development;
77. Kurzman, Werum and Burkhart, 'Democracy's Economic Effects'.
78. Robert Jackman, 'The Politics of Economic Growth in Industrialized Countries, 1974-1980', Journal of Politics, 49 (1987), 242-56.
79. In column 4 of Table 4 and column 5 of Table 5, dropping outliers implied that there were no time periods common to all panels, and hence panel-corrected standard errors could not be run. These two columns therefore utilize generalized least squares with correction for autocorrelation, using STATA's 'xtregar' command.
80. Ross Levine and David Renelt, 'A Sensitivity Analysis of Cross-Country Growth Regressions', American Economic Review, 82 (1992), 942-63.
81. Xavier Sala-i-Martin, 'I Just Ran Two Million Regressions', American Economic Review, 87 (1997), 178-83.
82. See the Appendix for details and citations.
83. Specifically, following Helliwell, 'Empirical Linkages between Democracy and Economic Growth', models using initial per capita GDP and democracy to predict both investment and secondary school attainment show no significant effect from democracy in 1960-2000, 1960-80, or 1980-2000 in either of the regions. Results available from author upon request.
84. Helliwell, 'Empirical Linkages between Democracy and Economic Growth';
85. Matthew A. Baum and David A. Lake, 'The Political Economy of Growth: Democracy and Human Capital', American Journal of Political Science, 47 (2003), 333-47. It is worth noting that the supplementary analyses described in the preceding footnote did in fact show significant effects from democracy on both investment and education in some periods when tested in the full sample rather than in the regional samples.
86. Polity 4, downloaded on 26 February 2003, from http://www.cidcm.umd.edu/ inscr/polity/.
87. Penn World Tables 6.1, downloaded on 6 May 2003, from http://pwt.econ.upenn.edu/. The specific variables are RGDPL, KG, POP, KOPEN and KI.
88. The variable S from the Barro and Lee Panel Data Set, 1994, downloaded on 28 August 2002, from http://www.nuff.ox.ac.uk/Economics/Growth/barlee.htm.
89. The variable SEC15 from the Barro and Lee Panel Data Set on Educational Attainment, 2000, downloaded on 6 May 2003, from http://www.worldbank.org/ research/growth/ddbarle2.htm.
90. The variable life expectancy at birth (total years) is from the World Bank, World Development Indicators (Washington, D.C.: World Bank 2002), CD-ROM. The measure of labour force growth is derived from two additional World Bank variables, namely total population and total economically active population.
91. The variables CLIMATE and ICRGE80, both from Bleaney and Nishiyama, 'Explaining Growth'. The authors kindly shared their data via email correspondence.