Democracy, regime stability, and growth
2002
J. Pettersson
This study argues that a weak relation between democracy and economic growth found in previous studies is due to the neglect of the increase of stability of institutions over time, and the interaction of this stability with the type of political regime. The author claims differences in the stability of regimes might be of greater relevance than differences in the kinds of policies applied, in terms of economic growth coupled with democratic governance. This would mean that young democracies tend to pay high initial costs on their economic growth rates, while over time, stable democratic regimes would outperform other types of regime.The study investigates whether economic benefits show up with a lag, so that democratisation means a heavy investment with no immediate economic pay off. If this is the case, claims the author, a stronger case for an involvement of the international community is made during an initial fragile phase, and there would be moral implications for aid donors’ conditionality where this includes democratisation.In studying the relationship between political regime, its duration, and economic growth, the paper suggests that as regimes grow older, democracies are relatively more successful than autocracies. It goes further to assert that, if a non-linear relationship is present, this result stems from the duration of policies rather than policy measure as such. But with democracies paying a heavy initial cost on economic growth, there remains to be found substitutes to overcome the initial lack of regime credibility. This is particularly important for aid donors, especially if democracy came about as a result of conditionality.
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