The Effect of Democratization on Growth of Developing Countries

Abstract

We investigate the effect of the level and continuity of democratization on growth of developing countries by estimating growth equations based on panel and cross-section data with economic and socio-economic variables. We provide three main sets of results. Firstly, we conduct panel data analysis that chiefly tries to answer whether the level of democratization has a statistically significant effect on growth for developing countries. This set of results adds to the literature on the growth and economic freedom literature as well as providing evidence for the link between political freedom and economic growth. This is complemented by a cross-section analysis that aims to answer if the set backs in the democratization process has a statistically significant effect on growth of countries. Thirdly, we also ask whether there is convergence in the level of democratization. Our finding of no convergence in democracy is troubling, however, our analysis indicates that stability of democracy might be more important than the level of democratization. © 2009 Nova Science Publishers, Inc.