Democracy%20Does%20Not%20Cause%20Growth%3A%0D%0AThe%20Importance%20of%20Endogeneity%20Arguments

Working Papers

Democracy Does Not Cause Growth: The Importance of Endogeneity Arguments


CODE: IDB-WP-694
AUTHOR(s): Ruiz Pozuelo, Julia , Slipowitz, Amy , Vuletin, Guillermo
PUBLISHED: July 2016
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

This article challenges recent findings that democracy has sizable effects on economic growth. As extensive political science research indicates that economic turmoil is responsible for causing or facilitating many democratic transitions, the paper focuses on this endogeneity concern. Using a worldwide survey of 165 country-specific democracy experts conducted for this study, the paper separates democratic transitions into those occurring for reasons related to economic turmoil, here called endogenous, and those grounded in reasons more exogenous to economic growth. The behavior of economic growth following these more exogenous democratizations strongly indicates that democracy does not cause growth. Consequently, the common positive association between democracy and economic growth is driven by endogenous democratization episodes (i.e., due to faulty identification).

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