chapter  5
15 Pages

Democracy’s indirect role for growth and technological change

Is democracy good for growth? The debate on this issue is hardly new, neither among scholars nor among interested parties.2 If one looks at single cases like Singapore since the 1960s and the People’s Republic of China since its economic reforms began in the 1980s, one might doubt that democracy is an indispensable prerequisite. Yet, in order to reach general conclusions, empirical evidence should not rest on single cases. Consequently, over the last decades numerous cross-national studies addressing the issue have been undertaken. However, the results of over thirty studies are ambiguous. As we enter this seemingly overstudied field, I seek to give fresh impetus to the inquiry. I argue that the inconclusiveness of the results obtained so far are due to a flawed research design. These studies went astray by relating democracy directly to economic growth in a Barro-type series of ad hoc regressions (see Barro 1996); such an approach entirely ignores the complexity of the relationships involved. Necessarily, the channels through which democracy, as a set of political practices, affects economic growth must be indirect, whether via institutional outcomes or via empowering people. Such outcomes then affect investors and workers and, only through these, economic development.