Working Paper: CEPR ID: DP5654
Authors: Torsten Persson; Guido Tabellini
Abstract: We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's historical experience with democracy and by the incidence of democracy in its neighborhood - reduces the exit rate from democracy and raises the exit rate from autocracy. In democracies, a higher stock of democratic capital stimulates growth in an indirect way by decreasing the probability of a sucessful coup. Our results suggest a virtuous circle, where the accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.
Keywords: Economic growth; Hazard rates; Political regimes
JEL Codes: D70; H11; N10; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Political instability (O17) | Negative impact on economic growth (F69) |
| Higher stock of democratic capital (D72) | Reduces exit rate from democracy (D72) |
| Higher incidence of democratic capital (P19) | Increases exit rate from autocracy (D72) |
| Democratic capital (P16) | Positive effect on growth in stable democracies (O43) |