DP5654 Democratic Capital: The Nexus of Political and Economic Change
|Author(s):||Torsten Persson, Guido Tabellini|
|Publication Date:||May 2006|
|Keyword(s):||economic growth, hazard rates, political regimes|
|JEL(s):||D70, H11, N10, O11|
|Programme Areas:||International Macroeconomics, Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=5654|
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.