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Journal ArticleDOI

Democracy and Economic Growth: A Historical Perspective

01 Apr 2005-World Politics (Cambridge University Press)-Vol. 57, Iss: 3, pp 323-364
TL;DR: In this paper, the authors argue that the causal effect of democracy can be measured by a country's regime status in a particular year (T), which is correlated with its growth performance in a subsequent period (T+l).
Abstract: Recent studies appear to show that democracy has no robust association with economic growth. Yet all such work assumes that the causal effect of democracy can be measured by a country's regime status in a particular year (T), which is correlated with its growth performance in a subsequent period (T+l). The authors argue that democracy must be understood as a stock, rather than a level, measure. That is, a country's growth performance is affected by the number of years it has been democratic, in addition to the degree of democracy experienced during that period. In this fashion, democracy is reconceptualized as a historical, rather than a contemporary, variable—with the assumption that long-run historical patterns may help scholars to understand present trends. The authors speculate that these secular-historical influences operate through four causal pathways, each of which may be understood as a type of capital: physical capital, human capital, social capital, and political capital. This argument is tested in a crosscountry analysis and is shown to be robust in a wide variety of specifications and formats.
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Journal ArticleDOI
TL;DR: Seven case selection procedures are considered, each of which facilitates a different strategy for within-case analysis and discusses quantitative approaches that meet the goals of the approach, while still requiring information that can reasonably be gathered for a large number of cases.
Abstract: How can scholars select cases from a large universe for in-depth case study analysis? Random sampling is not typically a viable approach when the total number of cases to be selected is small. Hence attention to purposive modes of sampling is needed. Yet, while the existing qualitative literature on case selection offers a wide range of suggestions for case selection, most techniques discussed require in-depth familiarity of each case. Seven case selection procedures are considered, each of which facilitates a different strategy for within-case analysis. The case selection procedures considered focus on typical, diverse, extreme, deviant, influential, most similar, and most different cases. For each case selection procedure, quantitative approaches are discussed that meet the goals of the approach, while still requiring information that can reasonably be gathered for a large number of cases.

2,608 citations

Journal ArticleDOI
TL;DR: In this article, the authors identify the effect of social capital on financial development by exploiting social capital differences within Italy and find that households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit.
Abstract: To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.

1,895 citations

Journal ArticleDOI
TL;DR: In this paper, the authors exploit the well-known differences in social capital across different parts of Italy to identify the effect of social capital on financial development, and show that the behavior of movers is still affected by the level of Social capital present in the province where they were born.
Abstract: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital (Banfield (1958), Putnam (1993)) across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, are more likely to use checks, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less-educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital present in the province where they were born.

1,034 citations

Journal ArticleDOI
Philip Keefer1
TL;DR: The authors identified for the first time systematic performance differences between younger and older democracies and argued that these are driven by the inability of political competitors to make broadly credible preelectoral promises to voters.
Abstract: This article identifies for the first time systematic performance differences between younger and older democracies and argues that these are driven by the inability of political competitors to make broadly credible preelectoral promises to voters. Younger democracies are more corrupt; exhibit less rule of law, lower levels of bureaucratic quality and secondary school enrollment, and more restrictions on the media; and spend more on public investment and government workers. This pattern is exactly consistent with the predictions of Keefer and Vlaicu (n.d.). The inability of political competitors to make credible promises to citizens leads them to prefer clientelist policies: to underprovide nontargeted goods, to overprovide targeted transfers to narrow groups of voters, and to engage in excessive rent seeking. Other differences that young democracies exhibit, including different political and electoral institutions, greater exposure to political violence, and greater social fragmentation, do not explain, either theoretically or empirically, these policy choices.

636 citations


Cites background from "Democracy and Economic Growth: A Hi..."

  • ...Barndt et al. (2005) shows that countries with less democratic experience grow more slowly....

    [...]

Journal ArticleDOI
TL;DR: In this article, the authors describe a widely used data set on democracy, covering 1800-2007 and 219 countries, which represents the most comprehensive dichotomous measure of democracy currently availab...
Abstract: This article updates and describes a widely used data set on democracy. Covering 1800–2007 and 219 countries, it represents the most comprehensive dichotomous measure of democracy currently availab...

608 citations


Cites background from "Democracy and Economic Growth: A Hi..."

  • ...Second, several recent studies use a “democratic stock” variable (usually a discounted sum of past years of democracy) as an explanatory variable for outcomes like economic growth or democratic stability (Muller 1988; Gerring et al. 2005; Persson and Tabellini 2009)....

    [...]

References
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Book
01 Jan 1990
TL;DR: Douglass C. North as discussed by the authors developed an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time.
Abstract: Continuing his groundbreaking analysis of economic structures, Douglass North develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet, institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while others develop institutions that produce stagnation. North first explores the nature of institutions and explains the role of transaction and production costs in their development. The second part of the book deals with institutional change. Institutions create the incentive structure in an economy, and organisations will be created to take advantage of the opportunities provided within a given institutional framework. North argues that the kinds of skills and knowledge fostered by the structure of an economy will shape the direction of change and gradually alter the institutional framework. He then explains how institutional development may lead to a path-dependent pattern of development. In the final part of the book, North explains the implications of this analysis for economic theory and economic history. He indicates how institutional analysis must be incorporated into neo-classical theory and explores the potential for the construction of a dynamic theory of long-term economic change. Douglass C. North is Director of the Center of Political Economy and Professor of Economics and History at Washington University in St. Louis. He is a past president of the Economic History Association and Western Economics Association and a Fellow, American Academy of Arts and Sciences. He has written over sixty articles for a variety of journals and is the author of The Rise of the Western World: A New Economic History (CUP, 1973, with R.P. Thomas) and Structure and Change in Economic History (Norton, 1981). Professor North is included in Great Economists Since Keynes edited by M. Blaug (CUP, 1988 paperback ed.)

27,080 citations

Journal ArticleDOI
TL;DR: In this article, the generalized method of moments (GMM) estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables.
Abstract: This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables. We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying restrictions and Hausman specification tests.

26,580 citations

Posted Content
TL;DR: In this article, the authors examine the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time.
Abstract: Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)

26,011 citations

ReportDOI
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
Abstract: This paper describes a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction. It also establishes consistency of the estimated covariance matrix under fairly general conditions.

18,117 citations

Book
01 Jan 1942
TL;DR: In this paper, the authors present a history of the first half of the 20th century, from 1875 to 1914, of the First World War and the Second World War.
Abstract: Introduction. Part I: The Marxian Doctrine. Prologue. I. Marx the Prophet. II. Marx the Sociologist. III. Marx the Economist. IV Marx the Teacher. Part II: Can Capitalism Survive? Prologue. V. The Rate of Increase of Total Output. VI. Plausible Capitalism. VII. The Process of Creative Destruction. VIII. Monopolistics Practices. IX. Closed Season. X. The Vanishing of Investment Opportunity. XI. The Civilization of Capitalism. XII. Crumbling Walls. XIII. Growing Hostility. XIV. Decomposition. Part III: Can Socialism Work? XV. Clearing Decks. XVI. The Socialist Blueprint. XVII. Comparison of Blueprints. XVIII. The Human Element. XIX. Transition. Part IV: Socialism and Democracy. XX. The Setting of the Problem. XXI. The Classical Doctrine of Democracy. XXII. Another Theory of Democracy. XXIII. The Inference. Part V: A Historical Sketch of Socialist Parties. Prologue. XXIV. The Nonage. XXV. The Situation that Marx Faced. XXVI. From 1875 to 1914. XXVII. From the First to the Second World War. XXVIII. The Consequences of the Second World War. Preface to the First Edition, 1942. Preface to the Second Edition, 1946. Preface to the Third Edition, 1949. The March Into Socialism. Index.

16,667 citations