Democracy, growth, heterogeneity, and robustness

Abstract

I motivate and empirically investigate differential long-run growth effects of democratisation across countries. While the existing literature recognises the potential for such heterogeneity, empirical implementations to date unanimously assume a common democracy-growth nexus across countries. Adopting novel methods for causal inference in policy evaluation I relax the homogeneity assumption. My results confirm that in the long-run democracy has a positive and significant average effect on per capita income, albeit at 10% this is at best half the magnitude of recent estimates in the literature. Guided by existing theories, additional analysis probes the patterns of the heterogeneous ‘democratic dividend’ across countries. Adopting two rule-based robustness exercises I furthermore demonstrate that, in contrast to recent contributions to the literature, my approach yields empirical findings that are robust to substantial changes to the sample.