The political economy of development: A cross-national causality test of development-democracy-growth hypothesis

Abstract

BackgroundThe development-democracy-growth hypothesis has received much attention from social scientists. The literature concerned with the level of economic development and prevalence of democratic institutions specifies a causal flow from the former to the latter. Whereas, the literature dealing with the relationship between the rate of economic growth and democratic character of political institutions assumes a causal flow from the latter to the former. The hypothesized development-democracy-growth relationship demonstrates that the level of economic development determines the type of political institutions and the type of political institutions impacts the rate of economic growth. In most studies, empirical evidence establishes only correlations and not causal relations. Correlation analysis can only indicate the existence of causal connection. It cannot, however, determine the direction of causation. The causal relationships between development and democracy and democracy and growth are the focus of the present study. The relative importance of a set of preconditions as well as a number of supporting variables for the establishment of political democracy and its association with economic growth are analyzed and empirically examined.A historical evaluation of the political economy of development in the Third World during the past three decades can clearly reveal that (1) a peopleoriented development strategy, which improves the quality of human life for the largest segment of the population, requires mass participation in the decision making process and thereby creates conditions for the emergence of democratic institutions and (2) the installment of authoritarianism is made possible at too high a human cost and an enormous waste of vital resources in an attempt to establish a 'social cement' and maintain the 'status quo'. Consequently, I shall doubt the validity of a highly publicized thesis that 'the political economy of development poses a cruel choice between rapid (self-sustain) expansion and democratic processes' (Bhagwati, 1966: 203-204). My assessment is based mainly on the social, economic, and political performance of a number

Political instability and economic growth: Evidence from two decades of transition in CEE

“…A democratic political system creates conditions conducive to growth because it allows the most active and talented citizens to participate fully in business. Other studies have also found a significant positive association between democracy and economic growth, especially in the direction from democracy to growth (see for example Nelson and Singh, 1998;Pourgerami, 1988;Fedderke and Klitgaard, 1998;de Haan et al 2006). In a contribution by Nelson and Singh (1998) it is emphasized, however, that political freedom and democracy in developing countries could undermine the effectiveness of government policy with discipline, law and order.…”

Are Democratic Regimes Antithetical to Globalization?

“…Kormendi and Meguire (1985) studied 47 countries during 1950-1977 and found that democratic countries grew faster. Pourgerami (1988) studied 92 countries during [1965][1966][1967][1968][1969][1970][1971][1972][1973][1974][1975][1976][1977][1978][1979][1980][1981][1982][1983][1984] and found that democratic countries grew faster. Scully (1988; studied 115 countries during and found that democratic countries grew faster.…”

Ontwikkelingsbeleid en goed bestuur

“…Er is een aantal studies dat een (iets) afwijkende onderzoekstechniek kiest. Zo baseert Pourgerami (1988) In het onderzoek naar sociaal-economische instituties en ontwikkeling worden de instituties doorgaans als exogeen opgevat. De schaarse studies die sociaaleconomische instituties endogeniseren, rapporteren interessante bevindingen.…”

“…De schaarse studies die sociaaleconomische instituties endogeniseren, rapporteren interessante bevindingen. Zo stelt Pourgerami (1988) dat marktregulering weliswaar een positief effect heeft op economische groei, maar dat marktregulering deels weer positief wordt beïnvloed door het ontwikkelingsniveau, democratie en cultuur. Clague et al (1997a) constateren dat duurzame democratieën een betere bescherming bieden voor eigendomsrechten dan niet-duurzame politieke regimes en dat duurzame autocratieën eigendomsrechten beter respecteren dan niet-duurzame autocratieën.…”