Acemoglu, D., Naidu, S., Robinson, A. J. & Restrepo, P. (2014) “Democracy causes economic development?“, VoxEU Organisation, 19 May.
Many analysts view democracy as a neutral or negative factor for growth. This column discusses new evidence showing that democracy has a robust and sizable pro-growth effect. The central estimates suggest that a country that switches from non-democracy to democracy achieves about 20% higher GDP per capita over the subsequent three decades.
A belief that democracy is bad for economic growth is common in both academic political economy as well as the popular press. Robert Barro’s seminal research in this area concluded that “More political rights do not have an effect on growth…The first lesson is that democracy is not the key to economic growth” (Barro 1997, pp. 1 and 11). Meanwhile, reacting to the rise of China, New York Times columnist Tom Friedman argues:
“One-party nondemocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century […]”
In “Democracy Does Cause Growth”, we present evidence from a panel of countries between 1960 and 2010 challenging this view. Our results show a robust and sizable effect of democracy on economic growth. Our central estimates suggest that a country that switches from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the long run (over roughly the next 30 years). These are large but not implausible effects, and suggest that the global rise in democracy over the past 50 years (of over 30 percentage points) has yielded roughly 6% higher world GDP .
Relevant posts:
- Muro, D. & Vidal Lorda, G. (2014) “Persistent unemployment poses a substantive threat to democracy in Southern European countries“, London School of Economics and Political Science, 13 March.
- Crum, B. (2013) “Saving the Euro at the Cost of Democracy“, Journal of Common Market Studies, Vol. 51, Issue 4, July 2013, p.p. 614-630.
- Habermas, J. (2013) “Democracy, Solidarity And The European Crisis“, Social Europe Journal, 7 May.