Political Institutions and Economic Growth – A Complicated Relationship

Democracy, Autocracy and Economic Development
https://www.washingtonpost.com/blogs/monkey-cage/wp/2014/12/29/economic-development-promotes-democracy-but-theres-a-catch/

Carlos Pereira and Vladimir Teles have written an interesting paper titled - Political Institutions, Economic Growth, and Democracy: The Substitute Effect. Based on their research, Pereira and Teles conclude:

“… the results show that the effects of political institutional variables are different for autocracies and democracies. In democratic regimes, the longer political power is held by a particular political leader, the greater economic growth will be; however, when dealing with autocracies such effect is reversed. Political polarization also has an opposing effect under democratic and authoritarian regimes. While this variable does not help authoritarian governments to achieve good economic performance, it does provide a positive impact on democratic governments.

Given that political institution variables often suggest a certain degree of political rights, the results suggest that even autocratic regimes can have a satisfactory economic performance as long as some political rights are granted to society. It also might suggest that political institutions work as a substitute for democracy in authoritarian regime, generating economic growth. In other words, autocracies can differentiate from one another in terms of political institutions. That corroborates the claim of Przeworski et al. (2000), who have not found considerable differences between the economic growth as a function of political regime, either in democracies or autocracies.”

Related research:

The democratic transition by Fabrice Murtin · Romain Wacziarg

Abstract

Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.

http://www.anderson.ucla.edu/faculty_pages/romain.wacziarg/downloads/transition.pdf

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens by Martin Gilens (Princeton University) and Benjamin I. Page (Northwestern University); Perspectives on Politics

Abstract

Each of four theoretical traditions in the study of American politics – which can be characterized as theories of Majoritarian Electoral Democracy, Economic Elite Domination, and two types of interest group pluralism, Majoritarian Pluralism and Biased Pluralism – offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.

A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. This paper reports on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.

Summary of the study from the BBC: http://www.bbc.com/news/blogs-echochambers-27074746