Nav: Home

Study: Democracy fosters economic growth

March 07, 2019

As long as democracy has existed, there have been democracy skeptics -- from Plato warning of mass rule to contemporary critics claiming authoritarian regimes can fast-track economic programs.

But a new study co-authored by an MIT economist shows that when it comes to growth, democracy significantly increases development. Indeed, countries switching to democratic rule experience a 20 percent increase in GDP over a 25-year period, compared to what would have happened had they remained authoritarian states, the researchers report.

"I don't find it surprising that it should be a big effect, because this is a big event, and nondemocracies, dictatorships, are messed up in many dimensions," says Daron Acemoglu, an MIT economist and co-author of the new paper about the study.

Overall, Acemoglu notes, democracies employ broad-based investment, especially in health and human capital, which is lacking in authoritarian states.

"Many reforms that are growth-enhancing get rid of special favors that nondemocratic regimes have done for their cronies. Democracies are much more pro-reform," he says.

The paper, "Democracy Does Cause Growth," is published this month in the Journal of Political Economy. The co-authors are Acemoglu, who is the Elizabeth and James Killian Professor of Economics at MIT; Suresh Naidu, an associate professor of economics and international and public affairs at Columbia University; Pascual Restrepo, an assistant professor of economics at Boston University; and James Robinson, a political scientist and economist at the Harris School of Public Policy of the University of Chicago.

Study the "switchers"

Acemoglu and Robinson have worked together for nearly two decades on research involving the interplay of institutions, political systems, and economic growth. The current paper is one product of that research program.

To conduct the study, the researchers examined 184 countries in the period from 1960 to 2010. During that time, there were 122 democratizations of countries, as well as 71 cases in which countries moved from democracy to a nondemocratic type of government.

The study focuses precisely on cases where countries have switched forms of rule. That's because, in part, simply evaluating growth rates in democracies and nondemocracies at any one time does not yield useful comparisons. China may have grown more rapidly than France in recent decades, Acemoglu notes, but "France is a developed economy and China started at 1/20 the income per capita of France," among many other differences.

Instead, Acemoglu and his colleagues aimed to "ask more squarely the counterfactual question" of how a country would have done with another form of government. To properly address that, he adds, "The obvious thing to do is focus on switchers" -- that is, the countries changing from one mode of government to another. By closely tracking the growth trajectories of national economies in those circumstances, the researchers arrived at their conclusion.

They also found that countries that have democratized within the last 60 years have generally done so not at random moments, but at times of economic distress. That sheds light on the growth trajectories of democracies: They start off slowly while trying to rebound from economic misery.

"Dictatorships collapse when they're having economic problems," Acemoglu says. "But now think about what that implies. It implies that you have a deep recession just before democratization, and you're still going to have low GDP per capita for several years thereafter, because you're trying to recover from this deep dive. So you're going to see several years of low GDP during democracy."

When that larger history is accounted for, Acemoglu says, "What we find is that [economies of democracies] slowly start picking up. So, in five or six years' time they're not appreciably richer than nondemocracies, but in a 10-to-15-year time horizon they become a little bit richer, and then by the end of 25 years, they are about 20 percent richer."

Investing in people

As for the underlying mechanisms at work in the improved economies of democracies, Acemoglu notes that democratic governments tend to tax and invest more than authoritarian regimes do, particularly in medical care and education.

"Democracies ... do a lot of things with their money, but two we can see are very robust are health and education," Acemoglu says. The empirical data about those trends appears in a 2014 paper by the same four authors, "Democracy, Redistribution, and Inequality."

For his part, Acemoglu emphasizes that the results include countries that have democratized but failed to enact much economic reform.

"That's what's remarkable about this result, by the way," says Acemoglu. "There are some real basket-case democracies in our sample. ... But despite that, I would say, the result is there."

And despite the apparently sunny results of the paper, Acemoglu warns that there are no guarantees regarding a country's political future. Democratic reforms do not help everyone in a society, and some people may prefer to let democracy wither for their own financial or political gain.

"It is possible to see this paper as an optimistic, good-news story [in which democracy] is a win-win," says Acemoglu. "My reading is not a good-news story. ... This paper is making the case that democracy is good for economic growth, but that doesn't make it easy to sustain."

In the study's sample of countries, Acemoglu adds, "We have almost twice as many democratizations as reversals of democracy, but the last 10 years, that number's going the other way around. So democracy doesn't have a walk in the park. It's important to understand what democracy's benefits are and where its fault lines are. I see this as part of that effort."
-end-
Support for the research was provided by the Bradley Foundation and the Army Research Office Multidisciplinary University Research Initiative.

Written by Peter Dizikes, MIT News

Related links

Daron Acemoglu

http://economics.mit.edu/faculty/acemoglu

ARCHIVE: Is democracy dying?

http://news.mit.edu/2018/starr-forum-democracy-dying-0227

ARCHIVE: Street signs

http://news.mit.edu/2017/investors-democratic-revolution-egypt-arab-spring-1220

ARCHIVE: Three MIT scholars awarded prestigious Carnegie fellowships

http://news.mit.edu/2017/three-mit-scholars-carnegie-fellowships-0426

ARCHIVE: State of growth

http://news.mit.edu/2015/local-national-governments-spur-growth-0909

ARCHIVE: All the difference in the world

http://news.mit.edu/2012/why-nations-fail-0323

ARCHIVE: Avoiding carbon copies

http://news.mit.edu/2009/research-diversity-091609

Massachusetts Institute of Technology

Related Health Articles:

Health records pin broad set of health risks on genetic premutation
Researchers from the University of Wisconsin-Madison and Marshfield Clinic have found that there may be a much broader health risk to carriers of the FMR1 premutation, with potentially dozens of clinical conditions that can be ascribed directly to carrying it.
Attitudes about health affect how older adults engage with negative health news
To get older adults to pay attention to important health information, preface it with the good news about their health.
Geographic and health system correlates of interprofessional oral health practice
In the current issue of Family Medicine and Community Health (Volume 6, Number 2, 2018, pp.
Bloomberg era's emphasis on 'health in all policies' improved New Yorkers' heart health
From 2002 to 2013, New York City implemented a series of policies prioritizing the public's health in areas beyond traditional healthcare policies and illustrated the potential to reduce cardiovascular disease risk.
Youth consider mobile health units a safe place for sexual health services
Mobile health units bring important medical services to communities across the country.
Toddler formulas and milks -- not recommended by health experts -- mislead with health claims
Misleading labeling on formulas and milks marketed as 'toddler drinks' may confuse parents about their healthfulness or necessity, finds a new study by researchers at the NYU College of Global Public Health and the Rudd Center for Food Policy & Obesity at the University of Connecticut.
Women's health has worsened while men's health has improved, trends since 1990 show
Swedish researchers have studied health trends among women and men aged 25-34 from 1990-2014.
Health insurance changes, access to care by patients' mental health status
A research letter published by JAMA Psychiatry examined access to care before the Patient Protection and Affordable Care Act (ACA) and after the ACA for patients grouped by mental health status using a scale to assess mental illness in epidemiologic studies.
Community health workers lead to better health, lower costs for Medicaid patients
As politicians struggle to solve the nation's healthcare problems, a new study finds a way to improve health and lower costs among Medicaid and uninsured patients.
Public health guidelines aim to lower health risks of cannabis use
Canada's Lower-Risk Cannabis Use Guidelines, released today with the endorsement of key medical and public health organizations, provide 10 science-based recommendations to enable cannabis users to reduce their health risks.
More Health News and Health Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Rethinking Anger
Anger is universal and complex: it can be quiet, festering, justified, vengeful, and destructive. This hour, TED speakers explore the many sides of anger, why we need it, and who's allowed to feel it. Guests include psychologists Ryan Martin and Russell Kolts, writer Soraya Chemaly, former talk radio host Lisa Fritsch, and business professor Dan Moshavi.
Now Playing: Science for the People

#538 Nobels and Astrophysics
This week we start with this year's physics Nobel Prize awarded to Jim Peebles, Michel Mayor, and Didier Queloz and finish with a discussion of the Nobel Prizes as a way to award and highlight important science. Are they still relevant? When science breakthroughs are built on the backs of hundreds -- and sometimes thousands -- of people's hard work, how do you pick just three to highlight? Join host Rachelle Saunders and astrophysicist, author, and science communicator Ethan Siegel for their chat about astrophysics and Nobel Prizes.