EMPIRICAL LINKAGES BETWEEN DEMOCRACY AND ECONOMIC-GROWTH

Using cross-sectional and pooled data for up to 125 countries over the period from 1960 to 1985, this article evaluates the two-way linkages between democracy and economic growth. The effects of income on democ racy are found to be robust and positive. The effects of several measu res of democracy and personal freedoms on growth are assessed in a com parative growth framework in which growth of GDP per adult depends neg atively on initial income levels, as implied by the convergence hypoth esis, and positively on rates of investment in physical and human capi tal. Adjusting for the simultaneous determination of income and democr acy makes the estimated partial effect of democracy on subsequent econ omic growth negative but insignificant. This nonsignificant negative e ffect is in any case counterbalanced by the positive indirect effect t hat democracy exerts on growth via education and investment. The gener al result of the growth analysis is that it is still not possible to i dentify any systematic net effects of democracy on subsequent economic growth.