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gerring 2004

gerring 2004

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02/01/2013

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Democracy and Economic Growth:
A Historical Perspective

John Gerring
Boston University
Department of Political Science
232 Bay State Road
Boston MA 02215
jgerring@bu.edu

Philip Bond
University of Pennsylvania
Wharton Finance Department
Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia PA 19104-6367
pbond@wharton.upenn.edu

William T. Barndt
Princeton University
Department of Politics
Corwin Hall
Princeton NJ 08540-1012
wbarndt@princeton.edu

Draft: June 14, 2004
2
Democracy and Economic Growth:
A Historical Perspective
ABSTRACT

Recent studies appear to show that democracy has no robust association with economic growth.
Yet, all such work assumes that the causal effect of democracy can be measured by a country\u2019s
regime status in a particular year (T), which is correlated with its growth performance in a
subsequent period (T+1). We argue that democracy must be understood as astock, rather thanlevel,
measure. That is, a country\u2019s growth performance is affected by the number of years it has been
democratic, in addition to the degree of democracy experienced during that period (running from
1900-2001). In this fashion, democracy is re-conceptualized as a historical, rather than
contemporary, variable -- with the assumption that long-run historical patterns may help us to
understand present trends. We speculate that these secular-historical influences operate through
four causal pathways, each of which may be understood as a type of capital: physical capital, human
capital, social capital, and political capital. This argument is tested in a cross-country analysis and is
shown to be robust in a wide variety of specifications and formats.

3

Does regime type affect economic performance?1 The predominant view is that democracy has
either a negative effect on GDP growth or no overall effect. Countries with authoritarian political
systems are thus predicted to grow as rapidly as democracies, perhaps even faster. To be sure,
democracy may have some positivei ndirect effects \u2013 e.g., greater stability or more extensive property
rights. However, the econometric evidence suggests that these positives are balanced by negatives
such that thenet effect of democracy on growth performance cross-nationally over the last five
decades is negative or null (e.g., Barro 1996; Feng 1997, 2003; Krieckhaus 2004; Kurzman, Werum,
Burkhart 2002; Przeworski and Limongi 1993, 1997; Przeworski et al. 2000).3 For the most part,
case study approaches to this question confirm the results of crossnational growth empirics (e.g.,
Chan 2002; Rodrik 2003; Woo-Cumings 1999). Thus, although most of the rich countries in the
world are democratic, the direction of causality is unclear. One must keep in mind that many rich
countries become rich under authoritarian auspices.

If this conventional conclusion is correct, one might be justified in concluding that
democracy is a luxury to be enjoyed only by countries rich enough to afford it. This, indeed, is a
common argument among authoritarian leaders in the developing world.4Others might counter
that democracy is worth the price of economic development because civic equality, political
participation, and civil liberties areintrinsically important (Shapiro and Hacker-Cordon 1999).
However, this argument is unlikely to inspire enthusiasm among those currently forced to live on
one dollar a day, roughly one fifth of the world\u2019s population. In summarizing the results of a recent
poll in eighteen Latin American countries the authors note that \u201cthe preference of citizens for
democracy is relatively low; many Latin Americans value development above democracy and would
even stop supporting a democratic government if it proved incapable to resolving their economic
problems\u201d (UNDP 2004: 6). Indeed, the demand for \u201cfood first\u201d sounds more sensible than the call
for \u201cdemocracy first.\u201d

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