The goal of this workshop is to discuss the recent research on the one of the most important topics: does democracy affect economic development. The fact that there are no rich non-democratic countries may also be explained by the reverse causality: the theory that democracy is sustainable in a rich country has been around at least since Lipset 1959; the well-known empirical work by Przeworski 2000 shows that this theory is consistent with the data.

• Since early 1990s economists have included democracy scores in cross-country growth regressions. The results have been inconclusive: there is no significant difference in economic performance between democratic and non-democratic regimes; in some specifications, democracy has a non-linear effect on growth. Case study evidence does not help either: non-democracies produce best growth episodes as well as the worst economic disasters.
• So the frontier research question is under which circumstances democracies are better than non-democracies. We will discuss the recent papers that go beyond cross-country regressions to explore the heterogeneity within democratic and autocratic regimes. Persson and Tabellini use semiparametric methods. Besley and Kudamatsu study individual autocratic regimes and are therefore able to control for country fixed effects. The participants are encourage to re-run and reproduce their regressions – all the data are available online (most importantly, the World Development Indicators and Polity IV dataset). As an example of a microeconomic study of the effect of political regime on growth, we will also discuss a recent paper in the emerging “politics and finance” literature by Durnev and Guriev.  

Outline of the workshop:

• Basic facts on democracy and development
• Lipset and the modernization argument
• Cross-country regressions. Barro (1994), Przeworski et al. (2000).
• Effect of heterogeneity:
• Heterogeneity within democracies: effect of political insitutions within democracies on growth (Besley and Persson, Persson and Tabellini, Besley and Case)
• Heterogeneity within autocracies: effect of political institutions within autocracies (Besley and Kudamatsu)
• New methodological approaches:
• Semi-parametric (Persson and Tabellini 2007)
• Microeconomic difference-in-difference-in-difference (Durnev and Guriev 2007)