Working Paper: CEPR ID: DP16587
Authors: Markus Eberhardt; Vanessa Boese
Abstract: How substantial are the economic benefits from democratic regime change? We argue that democratisation is not a discrete event but a two-stage process: autocracies first enter into 'episodes' of political liberalization; in the second stage, these episodes either culminate in regime change or not. Failure to account for this chronology and the implicit counterfactual groups risks biased estimates due to selection effects. Adopting a repeated-treatment difference-in-difference implementation, which captures non-parallel trends and selection into treatment, we find that a single event approach substantially underestimates the economic dividends from regime change and, crucially, obscures the permanent growth effect of democratisation.
Keywords: democracy; growth; political development; interactive fixed effects; difference-in-difference
JEL Codes: O10; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political liberalization (P39) | economic growth (O49) |
| democratization (D72) | economic growth (O49) |
| political liberalization (P39) | per capita GDP (E20) |
| democratization as a single event (D72) | underestimated economic growth (O49) |
| chronology of democratization (N40) | economic benefits (D61) |