Again: No Link Between Democracy and Growth

♠ Posted by Emmanuel in , at 8/13/2010 12:01:00 AM
Dani Rodrik is legendary in development studies and political science in general. While perusing the handiwork of our fellow IPE bloggers at North Carolina, I was surprised to come across his new Project Syndicate article which seemed to contradict much of what he's written before. If you are a close follower of development studies, you are undoubtedly familiar with his book One Economics, Many Recipes. In that compilation, Professor Rodrik makes the case that there is no single solution alike capitalist liberal democracy as per the likes of Francis Fukuyama and neoconservatives past, present, and future. Imagine my shock when he appeared to claim that democracies outperformed authoritarian regimes in terms of generating economic growth:
Democracies not only out-perform dictatorships when it comes to long-term economic growth, but also outdo them in several other important respects.
I almost fell out of my chair. Puzzled as to why one of the most formidable econometricians in development studies would write something rather questionable, I sent an e-mail to an old sparring partner in the blogosphere. (It seems he doesn't blog that much anymore, and I can certainly vouch that blogging is not exactly the most remunerative activity.) Anyway, he has since issued a correction which goes...
Due to an oversight on my part during the editing process, the sentence that started with “Democracies not only do not underperform dictatorships when it comes to long-term economic growth..” in my original version eventually became “Democracies not only out-perform dictatorships when it comes to long-term economic growth..” in the published piece. The change imparted a superiority to democracy in terms of growth which the evidence does not find and which I did not intend to express. Thanks to Dr. Emmanuel Yujuico for taking me to task over this change, which I had not noticed until he pointed it out.
It honestly bothers me that I was the first to notice this factual error. On the aforementioned webpage, there are supposedly 134 Facebook shares and 41 retweets, yet nobody bothered to flag this up. What worries me is that few folks are really that familiar with the literature or do not read closely enough.

This subject matter--the relationship between democracy and economic growth--has been researched to the point of becoming a cliche, but overall, econometric analysis yields a null result. There is, statistically speaking, no evidence that democracy has a direct impact on economic growth. None. Nada. Zip. Zilch. A paper that I can suggest for those unfamiliar with this area is Doucouliagos and Olubasoglu's meta-analysis--or an econometric study of studies--that provides a similar conclusion. (There's also a non-gated earlier version.) At best, democracy only has positive "indirect" effects, but it alone doesn't make it significantly more likely that economic growth will occur.

As for the freedom-and-growth shtick, save it for Wolfowitz, Perle, and Feith. To state things correctly, authoritarianism may not necessarily be conducive to economic growth, but neither is democracy. There are many political recipes for economic growth, period.