The latest news comes from a really interesting article from Science Daily about fascinating new international research by Massachusetts Institute of Technology economists:
A new study co-authored by an MIT economist shows that when it comes to growth, democracy significantly increases development. Indeed, countries switching to democratic rule experience a 20 percent increase in GDP over a 25-year period, compared to what would have happened had they remained authoritarian states, the researchers report.
“I don’t find it surprising that it should be a big effect, because this is a big event, and nondemocracies, dictatorships, are messed up in many dimensions,” says Daron Acemoglu, an MIT economist and co-author of the new paper about the study. Overall, Acemoglu notes, democracies employ broad-based investment, especially in health and human capital, which is lacking in authoritarian states.
It is much suggested reading, so take a look and get the full story here. The study, published in the Journal of Political Economy, was the product of research led by MIT’s Daron Acemoglu, Columbia University’s Suresh Naidu, Boston University’s Pascual Restrepo and University of Chicago’s James A. Robinson. From the paper abstract:
We provide evidence that democracy has a positive effect on GDP per capita. Our dynamic panel strategy controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy. To reduce measurement error, we introduce a new indicator of democracy that consolidates previous measures.
Our baseline results show that democratizations increase GDP per capita by about 20 percent in the long run. We find similar effects using a propensity score reweighting strategy as well as an instrumental-variables strategy using regional waves of democratization. The effects are similar across different levels of development and appear to be driven by greater investments in capital, schooling, and health.