Growth of GDP per capita and Democracy. A Simultaneous Equation Generalized Probit Model


Book Description

Master's Thesis from the year 2015 in the subject Economics - Economic Cycle and Growth, grade: 1, Vienna University of Economics and Business (Institut für Makroökonomie), language: English, abstract: The paper examines a potential reverse causality between the growth of GDP per capita and Democracy (data from Policy IV project). Therefore, a simultaneous equation generalized probit model is used. In the first step, the model is estimated under the assumption that the relationship between economic growth and democracy is linear and in the second step under the assumption the relationship is quadratic. Additional exogenous variables are the degree of urbanization, the age of the regime and the percentage of non-fuel exports in total exports. Further, the influence of religion is taken into account, whereby religion and ethnicity are distinguished. It is observed that the ethnical fragmentation has the opposite effect of religious fragmentation. The outcomes suggest that economic growth and the degree of a country ́s democratization indeed are mutually dependent and should not be treated as independent. Additional the outcomes confirm the idea that the relationship between growth and democracy is quadratic.




Empirical Linkages Between Democracy and Economic Growth


Book Description

Using cross-sectional and pooled data for up to 125 countries over the period from 1960 to 1985, this paper evaluates the two-way linkages between democracy and economic growth. The effects of income on democracy are found to be robust and positive. The effects of several measures of democracy on growth are assessed in a comparative growth framework in which growth of per capita GDP depends negatively on initial income levels, as implied by the convergence hypothesis, and positively on rates of investment in physical and human capital. Adjusting for the simultaneous determination of income and democracy makes the estimated direct effect of democracy on subsequent economic growth negative but insignificant. Allowing for the possible positive indirect effect of democracy on income, flowing through the positive effect of democracy on education and investment, tends to offset the negative direct effect of democracy on economic growth. The general result of the growth analysis is that it is still not possible to identify any systematic net effects of democracy on subsequent economic growth.




Income and Democracy


Book Description

We revisit Lipset‘s law, which posits a positive and significant relationship between income and democracy. Using dynamic and heterogeneous panel data estimation techniques, we find a significant and negative relationship between income and democracy: higher/lower incomes per capita hinder/trigger democratization. Decomposing overall income per capita into its resource and non-resource components, we find that the coefficient on the latter is positive and significant while that on the former is significant but negative, indicating that the role of resource income is central to the result.




Economic Democracy


Book Description

How a nation or region develops is infallibly linked to how well it can deliver ideas, information and data throughout its population. The greater the freedom to send, receive and synthesize information, the more likely a given country is to have a higher standard of living as measured by per capita income and other economic indicators. This study demonstrates that the economic development of a nation or region is connected to its ability to transport said intelligence in a highly expeditious and economic manner. Without this ability, technological development and the exchange / flow of ideas are intrinsically hampered and directly impacts economic development. In order to demonstrate this thesis, nations were classified via their respective technology IQ s or information quotient. This IQ is ascertained by several info centric technological variables that drive the flow of information and the freedom of market development / interaction. The information quotient s interactive nature, demonstrated via its close association with business, educational and social development, earmarks it as a refined predictor of technology growth hence economic power. There are four major info centric determinants (variables) that make up a nation s technology IQ: 1. Teledensity (Td) - the number of telephone lines (not phones) per 100 population. Teledensity represents fundamental communications, which is essential for the distribution of wealth and ideas. It is a consumer building block via the development of markets and the creation of economic reach. A telephone is useless unless connected to a network via a trunk. A trunk or service line can be explained as a portal to the outside world. Teledensity is not a metric of telephones but is a ratio of telephone stations to main lines. 2. Internet Density (Id) the number of Internet users divided by population times 100. Remember, Internet users need access to the outside world via a phone line or other data link. By definition, Internet utilization / development follows telephony development. This variable can be associated with increased business efficiency. It is a major factor to reducing costs within the business to business and e-commerce arena. This thesis invokes that Internet usage vastly increases consumerism outside national / regional boundaries thus expanding avenues of opportunity for growth and wealth creation on a global scale. 3. Cable Density (Cd) can bring broadband (high speed) capability to large segments of the populace and business communities. (Especially, small to medium sized business concerns). Cable is the life line of high speed interactive, secure communications. Its potential to bring accelerated growth to communities is exponential. Cd is calculated by taking the number of households divided by population times 100. Still it is important to issue a word of caution regarding cable density. In many less developed nations the cable infrastructure is old and used for one way CATV transmission. Upgrading to carry interactive voice and data could be prohibitive. 4. Finally, Wireless Density (Wd) represents number of cellular lines per 100 population. Unlike regular telephones, that can share a given line, each activated cellular phone, by definition, represents a line. Wireless or un-tethered communications represents time and execution efficiency for both business and consumer segments. It can also provide fundamental communications for developing nations that do not have a regular telephone network. Cellular Density may be a strong indicator of quick start economic growth but this remains to be seen. Cellular communication lacks speed, security, range and voice clarity. Secure data mobility, in the future, can expand business efficiency and further reduce communication, travel and data content to utilization costs. It is the next step associated with interactive Internet utilization as businesses and consumers become increasing mobile and self s




Stylized Facts of Democratization and Economic Growth in the Long-Term


Book Description

Do democracy and economic growth exerts similar patterns in the long-run? This paper systematically examines the processes of democratization and Real GDP per capita growth and highlights the existence of common patterns, classified into four groups according to an originally developed taxonomy: synergic success, erratic democratization, synergic failure and authoritarian growth. The analysis, accomplished both in a static and in a dynamic framework, shows that synergic success is the strikingly prevailing outcome in the long-run. The results are robust to different data sources and time-spans (1972-2010; 1980-2010; 1960-2010). The present analysis embodies an important advantage, i.e. the possibility of bypassing the challenge of defining democracy according to arbitrary thresholds in quantitative indices: the focus is in fact on the process of political development (along an ideal continuum from autocracy to democracy) rather than on its final output. Finally, the paper offers a tentative exploration of the potential role of conflicts and region-specific characteristics in affecting the outcome of the democracy/growth relationship.




Research Handbook on Democracy and Development


Book Description

Exploring and updating the controversial debates about the relationship between democracy and development, this Research Handbook provides clarification on the complex and nuanced interlinkages between political regime type and socio-economic development. Distinguished scholars examine a broad range of issues from multidisciplinary perspectives across Africa, Asia, Europe, Latin America and the Middle East.




Democracy and an Open-Economy World Order


Book Description

The essays in this volume explore several key issues facing democracies today. They discuss the dilemma of how to protect civil liberties and individual freedoms in the light of external threats and assess the policies adopted by governments in this area. The book also addresses the question of how free, exactly, free markets should be in an economy in order to secure social peace, before going on to highlight the rudiments of the model of social market economy, as applied in Germany. It examines the problem of the democratic and legitimacy deficits that beset European integration and suggests reforms for a more democratic European Union. Last but not least, by looking back in history, they provide evidence and propose policies for the revitalization of institutions in present-day democracies. The book is of considerable interest to researchers and students in economics and political science, as well as to readers who wish to gain insights into the thorny social issues involved.




Democracy, Governance, and Growth


Book Description

Demonstrates the importance of governance and social institutions to economic performance




Democracy and Development


Book Description

The relationship between economic development and political systems is of major importance in today's rapidly changing world. This is the issue addressed in this volume by an international team of academics drawn from the social sciences. The chapters range from a theoretical exploration of the measurement of development and collective well-being under both democracy and dictatorship to case studies of the workings of different political regimes around the world. Of particular interest are models of political and economic equilibrium in procedural democracies and the detailed exploration of the working of economic systems that have operated as formal democracies for some time. Specialists in comparative analysis will find the chapters on the prospects for democracy and development in countries such as China, South Africa and eastern Europe of special interest.