The role of democracy in economic growth : A (brief) literature review

Abstract:

This article presents a brief review of recent work by economists studying the effects of democracy on economic growth. These studies are divided into three groups: the first one supports the general view that democracy has a positive effect on economic growth; democratic regimes increase the level of GDP by creating the climate of trust, guaranteeing the protection of property rights, as well as reducing transaction costs, while dictatorship regimes strongly hinder economic growth. The second group of researchers stipulated that non-democratic regimes would be more favorable to increasing economic growth. For the third research group, there is no significant relationship between the two variables.

The common point of these studies, despite the absence of a consensus, is their insistence that the political regime matters for economic growth and development.

Keywords: Economic growth - Democracy - Institutions