Discussion Paper Details

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Title: Democratic Capital: The Nexus of Political and Economic Change

Author(s): Torsten Persson and Guido Tabellini

Publication Date: May 2006

Keyword(s): economic growth, hazard rates and political regimes

Programme Area(s): International Macroeconomics and Public Economics

Abstract: We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's historical experience with democracy and by the incidence of democracy in its neighborhood - reduces the exit rate from democracy and raises the exit rate from autocracy. In democracies, a higher stock of democratic capital stimulates growth in an indirect way by decreasing the probability of a sucessful coup. Our results suggest a virtuous circle, where the accumulation of physical and democratic capital reinforce each other, promoting economic development jointly with the consolidation of democracy.

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Bibliographic Reference

Persson, T and Tabellini, G. 2006. 'Democratic Capital: The Nexus of Political and Economic Change'. London, Centre for Economic Policy Research.