Discussion Paper Details

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Title: Democracy Doesn't Always Happen Over Night: Regime Change in Stages and Economic Growth

Author(s): Vanessa Boese and Markus Eberhardt

Publication Date: September 2021

Keyword(s): democracy, Difference-in-difference, growth, Interactive Fixed Effects and Political development

Programme Area(s): Macroeconomics and Growth and Political Economy

Abstract: How substantial are the economic benefits from democratic regime change? We argue that democratisation is not a discrete event but a two-stage process: autocracies first enter into 'episodes' of political liberalization; in the second stage, these episodes either culminate in regime change or not. Failure to account for this chronology and the implicit counterfactual groups risks biased estimates due to selection effects. Adopting a repeated-treatment difference-in-difference implementation, which captures non-parallel trends and selection into treatment, we find that a single event approach substantially underestimates the economic dividends from regime change and, crucially, obscures the permanent growth effect of democratisation.

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Bibliographic Reference

Boese, V and Eberhardt, M. 2021. 'Democracy Doesn't Always Happen Over Night: Regime Change in Stages and Economic Growth'. London, Centre for Economic Policy Research.