Abstract

There is a broad consensus in the social sciences that political institutions have a strong impact on economic development. There is no such consensus, however, about the specific influence of democratic order on economic performance. Based on arguments derived from economic institutionalism, this paper shows that democracy has a positive impact on productivity growth. In contrast to autocratic systems, a democratic order can be interpreted as a competition-friendly regulation of a natural monopoly, which results in comparatively high productivity gains. This hypothesis is supported by quantitative tests for a sample of 81 countries for the period of 1975-2000, which show that increasing levels of democracy generate a productivity dividend.

Recommended Citation

Faust, Jörg (2007) "Democracy's Dividend: Political Order and Economic Productivity," World Political Science Review: Vol. 3 : Iss. 2, Article 2.
Available at: http://www.bepress.com/wpsr/vol3/iss2/art2