Does democracy cause growth?

William Easterly’s new book, The Tyranny of Experts, argues that positive changes in freedoms are the causes of stable long run growth. But as he admitted to me recently on an Al-Jazeera talk show, the book does not present any rigorous evidence to back the claim, partly because thus far research findings have been mixed on the question of how democracy/autocracy impacts economic growth.

Well, Easterly’s book tour just got a boost thanks to Acemoglu et al. who have a new paper (see their blog post on it here) showing that democracy does indeed cause growth (boosting long run per capita income by as much as 20%):

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Reweighted relationship between GDP per capita and democracy (Source: Acemoglu et al., 2014)

Here is the paper’s abstract:

We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semi-parametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies [emphasis mine].

The full paper is available here.

Daron Acemoglu and James Robinson wrote the classic Economic Origins of Dictatorship and Democracy. The book is thin on empirics and analytical narratives, but is an amazing formal take on the subject of democratization. To balance Economic Origins you should probably also read Barrington Moore’s magnum opus Social Origins of Dictatorship and Democracy.

In which I talk development with Bill Easterly and others on Al Jazeera

This afternoon I joined NYU’s William Easterly, Ingrid Kvangraven of the New School and Daniel Kaufmann of Revenue Watch to talk about Easterly’s new book, The Tyranny of Experts. You will notice that I am a huge fan of STATE CAPACITY.

(Apparently, graduate school prepares you not for TV appearances…)

[youtube.com/watch?v=CmcL4R_PZRE]

Note: If you are in the US you have to VPN it since al jazeera doesn’t stream content in the US.

In preparation for the show I finally finished reading Easterly’s book. A review is coming soon (grad school permitting). 

 

Authoritarian Origins of Democratic Party Systems in Africa

That is the title of a new book by Rachel Riedl of Northwestern University on party system development in Africa following re-democratization in the early 1990s. Riedl writes:

To explain these country’s divergent development, I point to earlier authoritarian strategies to consolidate support and maintain power. The initial stages of democratic opening provide an opportunity for authoritarian incumbents to attempt to shape the rules of the new multiparty system in their own interests, but their power to do so depends on the extent of local support built up over time. Where authoritarian incumbents are strong, they tightly control the democratic transition process, which paradoxically leads to higher party system institutionalization in the new democratic system.  Conversely, where authoritarian incumbents are weak, they lose control of the transition agenda and new players contribute in uncoordinated ways to press for greater reform and more open participation, which results in lower party system institutionalization in the democratic era.  The particular form of the party system that emerges from the democratic transition is sustained over time through isomorphic competitive pressures embodied in the new rules of the game, the forms of party organization, and the competitive strategies that shape party and voter behavior alike.

The book is an excellent resource for understanding the evolution of party systems on the Continent.

Implied in the book’s argument is the centrality of state capacity to well-ordered development and consolidation of democracy. As the case of Mali shows, if there was ever a precondition for democracy it is certainly a reasonable level of state capacity. In other words, there has to be empowerment before limitation, or else you get collapse.