The Trade Cycle1

Abstract

The long-run relationship between polity change and economic growth has been considered by a number of researchers, yet no clear consensus has emerged concerning the causal link between these two important measures of progress. This study used various estimation methods based on different assumptions of the unknown error structure to investigate this relationship in 154 countries from 1961 to 2007. First, we found no globally significant relationship between polity change and economic growth. However, we found several significant relationships at the local level, including (a) a positive relationship in the 1980s and in Africa and (b) a negative relationship in the 1970s and in Europe. Second, we found that previous economic growth hinders democracy, albeit slightly; in contrast, the influence of democracy on economic growth is negligible.