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Title: Democracy, Growth, Heterogeneity, and Robustness

Author(s): Markus Eberhardt

Publication Date: November 2021

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

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

Abstract: I motivate and empirically investigate differential long-run growth effects of democratisation across countries. While the existing literature recognises the potential for such heterogeneity, empirical implementations to date unanimously assume a common democracy-growth nexus across countries. Adopting novel methods for causal inference in policy evaluation I relax this assumption to confirm that in the long-run democracy has a positive average effect on per capita income of around 10%, adopting a range of alternative definitions for regime change in the form of binary indicators. Guided by existing hypotheses, additional analysis probes the patterns of the heterogeneous 'democratic dividend' across countries. A second common feature of this literature as well as cross-country growth empirics more generally is the absence of concerns for sample selection or influential observations. I carry out two rule-based robustness exercises to demonstrate that my empirical findings are highly robust to substantial changes to the sample.

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Bibliographic Reference

Eberhardt, M. 2021. 'Democracy, Growth, Heterogeneity, and Robustness'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16719