Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265819 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15598
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper throws new light on the relationship between income and democracy. Using data for 162 countries over 1960-2018, we show that the causal relationship between political and economic development is U- shaped: "intermediate" political regimes significantly lead to inferior economic performance vis-à-vis both "democracies" and "autocracies." Our results suggest "intermediate" regimes decrease long run GDP per capita by about 20 percent. These effects are mainly driven by political instability, while other potential mechanisms, such as education, investment and inequality, lack comparable empirical support. These findings are robust to, among others, using night-lights instead of GDP, different democracy measures and estimators.
Subjects: 
democracy
income
growth
political development
economic development
non-linearity
JEL: 
C33
D72
F15
O43
P16
Document Type: 
Working Paper

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