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Democracy and Development: The Devil in the Details

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  • Torsten Persson
  • Guido Tabellini
Abstract
Does democracy promote economic development? We review recent attempts to address this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic reforms. First, democratizations and economic liberalizations in isolation each induce growth accelerations, but countries liberalizing their economy before extending political rights do better than those carrying out the opposite sequence. Second, different forms of democratic government and different electoral systems lead to different fiscal trade policies: this might explain why new presidential democracies grow faster than new parliamentary democracies. Third, it is important to distinguish between expected and actual political reforms: expectations of regime change have an independent effect on growth, and taking expectations into account helps identify a stronger growth effect of democracy.
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Suggested Citation

  • Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," Levine's Bibliography 122247000000001139, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:122247000000001139
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    1. Giavazzi, Francesco & Tabellini, Guido, 2005. "Economic and political liberalizations," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1297-1330, October.
    2. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    3. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    4. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    5. Torsten Persson & Guido Tabellini, 2005. "The Economic Effects of Constitutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661926, April.
    6. Persson, Torsten, 2005. "Forms of Democracy, Policy and Economic Development," CEPR Discussion Papers 4938, C.E.P.R. Discussion Papers.
    7. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
    8. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • P0 - Political Economy and Comparative Economic Systems - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • E0 - Macroeconomics and Monetary Economics - - General

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