Democracy and Economic Growth: A Meta-Analysis
Deakin University School of Accounting, Economics and Finance Working Paper Series No. 2006/04
39 Pages Posted: 13 Sep 2007
Despite a sizeable theoretical and empirical literature, no firm conclusions have been drawn regarding the impact of political democracy on economic growth. This paper challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy-growth literature. It applies meta-regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth. Using traditional meta-analysis estimators, the bootstrap, and Fixed and Random Effects meta-regression models, it derives several robust conclusions. Taking all the available published evidence together, it concludes that democracy does not have a direct impact on economic growth. However, democracy has robust, significant, and positive indirect effects through higher human capital, lower inflation, lower political instability, and higher levels of economic freedom. Democracies may also be associated with larger governments and less free international trade. There also appear to be country- and region-specific democracy-growth effects. Overall, democracy's net effect on the economy does not seem to be detrimental.
Keywords: Democracy, economic growth, meta-analysis
JEL Classification: O4, P5
Suggested Citation: Suggested Citation