ABSTRACT
The relationship between regime type and economic development has long been a theme in the political economy literature, but the question has gained new salience with the global wave of democratization. Research is beginning to explore the effects that variations in democratic institutions might have on economic policy and performance; this chapter provides an introduction to some of this literature. Research on the relationship between institutions and economic policy and performance is in its infancy, and it is thus important to retain caution and humility when drawing policy implications. It is dangerous to think that all political barriers to effective economic reform and governance can be overcome through institutional engineering. The chapter focuses on the interaction between basic constitutional choices—presidential versus parliamentary rule—and the party system. In a democratic system, parties serve as the key link between politicians and constituents, and the party system establishes the incentives for partisan competition.
