31 January 2023 Tuesday
The Relationship of Democracy and Economic Growth
The relationship between political regime and economic growth has been a controversial issue in the economics literature since the 1960s. The debate has its origins in an article which is called “Some Social Requisites of Democracy: Economic Development and Political Legitimacy” written by Lipset in 1959. According to Lipset, democracy has emerged and developed in countries where economic development has reached a certain level, in societies where the middle class has become stronger. In the article, Lipset has used some indicators such as wealth, industrialization, education and urbanization to compare European countries and Latin Amerika by their per capita income and thus mark those countries as “less democratic” with low per capita income or “more democratic” with high per capita income.
In response to Lipset's hypothesis there has been a thought that democracy does not follow the economic growth; on the contrary, it supports many phenomena such as civil-political rights and freedoms, the rule of law, and transparency and thus encourages the development of countries both politically and economically. In addition, the institutional infrastructure which brought by the democracy regime also have a positive effect on functioning of the free market, the protection of property rights, and the stable development of political and economic institutions. Many studies have yielded results that support these two views on the relationship between democracy and economic growth. While some studies have found that democracy promotes economic growth through human capital, some studies have concluded that democracy does not encourage economic growth. In a nutshell, there is no definite consensus about this relationship, thus testing this relationship with different analysis techniques keeps the subject up to date.
Tayyibe Karagöz/Ekonomy and ve Finance Res. Asisst.
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2018). Democracy Does Cause Growth. Journal of Political Economy, 127(1), 47-100.
North, D. C. (1991). Institutions. The Journal of Economic Perspectives, 5(1), 97-112.
Lipset, S. M. (1959). Some Social Requisites of Democracy: Economic Development and Political Legitimacy. The American Political Science Review, 53(1), 69-105. doi:10.2307/1951731
