The effect of democracy on different categories of economic freedom

Many empirical studies conclude that democracy increases economic freedom. However, these studies use highly aggregated indices of economic freedom, which eliminates interesting information. The purpose of this paper is to study empirically how in developing countries different categories of economic freedom are affected by democracy, measured either as political rights or civil liberties. Democracy appears to have a positive effect on the economic freedom categories Government Operations and Regulations and Restraints on International Exchange, but no effect on the categories Money and Inflation and Takings and Discriminatory Taxation. That a high level of democracy would have a negative effect on economic freedom reform receives no support in this study. The robustness of the results to the model specification and extreme points is tested.     

Democratic revolutions as institutional innovation diffusion: Rapid adoption and survival of democracy

Recent ‘democratic revolutions’ in Islamic countries call for a re-consideration of transitions to and from democracy. Transitions to democracy have often been considered the outcome of socio-economic modernization and therefore slow and incremental processes. But as a recent study has made clear, in the last century, transitions to democracy have mainly occurred through rapid leaps rather than slow and incremental steps. Here, we therefore apply an innovation and systems perspective and consider transitions to democracy as processes of institutional, and therefore systemic, innovation adoption. We show that transitions to democracy starting before 1900 lasted for an average of 50 years and a median of 56 years, while transitions originating later took an average of 4.6 years and a median of 1.7 years. However, our results indicate that the survival time of democratic regimes is longer in cases where the transition periods have also been longer, suggesting that patience paid in previous democratizations. We identify a critical ‘consolidation-preparing’ transition period of 12 years. Our results also show that in cases where the transitions have not been made directly from autocracy to democracy, there are no main institutional paths towards democracy. Instead, democracy seems reachable from a variety of directions. This is in line with the analogy of diffusion of innovations at the nation systems level, for which assumptions are that potential adopter systems may vary in susceptibility over time. The adoption of the institutions of democracy therefore corresponds to the adoption of a new political communications standard for a nation, in this case the innovation of involving in principle all adult citizens on an equal basis.     

Democracy and growth in Africa: Implications of increasing electoral competitiveness

Estimating a 1975–2004 decadal panel data in an augmented production-function framework, the paper finds that indexes of electoral competitiveness exhibit U-shape relationships with GDP growth, implying quite different “intermediate” and “advanced”-level effects of reforms in Africa.     

Is democracy good for growth? — Development at political transition time matters

Is democracy a better political regime for economic prosperity than autocracy? This paper shows that the answer depends on the initial economic development level during the democratic transition when the foundation of institutions was laid. Democracy facilitates growth only in countries that already have adequate development at transition time. These countries are more likely to create and sustain growth-enhancing institutions than others. Without appropriate development, democracy does not improve growth; this applies to about 40% of the third-wave democratized countries. These results are based on a sample of 153 countries in 1960–2010 and robust to various specifications and endogeneity issues.     

Democracy,Development and Comparative Institutional Advantage in Africa

Development in Africa has been stalled for decades in a vicious cycle of poverty, underdevelopment, corruption, and conflict. In this paper, we argue that donors should focus on democracy and accountability as a first priority in development aid. We use the theory of comparative institutional advantage to identify the key institutions that are most likely to facilitate economic development in communities in the modern world. These institutions include an efficient non-corrupt government sector. Subsequently, we discuss how a lack of democracy and accountability inevitably undermines development efforts and investment, referring especially to the Ethiopian experience but also considering the experiences of other African dictatorships. Finally, we discuss how donors, by emphasizing democracy and accountability along with other policies that support democratic institutions, have a greater chance of effectively contributing to African economic development.     

Institutional obstacles to African economic development: State, ethnicity, and custom

To account for the African growth tragedy and, in particular, for its causes rooted in governance problems, the institutional legacy that African countries inherited from pre-colonial and colonial times must be considered. Three aspects are examined here. First, the relationship between ethnicity and state performance is bi-directional: if strong ethno-regional identities prevent the emergence of modern citizenship, they themselves constitute an endogenous outcome of continuous state failures. Second, the persistence of informal rules and social norms causes legal dualism, which undermines the credibility of modern statutory law. Third, social customs and norms that hinder socio-economic differentiation and individual capital accumulation lower the performance of indigenous enterprises.     

正式制度与非正式制度如何驱动社会创业——基于效率驱动型国家的QCA研究

社会创业已成为解决社会问题的重要手段,然而对于如何驱动社会创业尚未有定论。以23个效率驱动型国家为研究样本,整合正式制度与非正式制度的5个前因条件,应用QCA方法,探讨了影响国家社会创业活跃度的多重并发因素与复杂因果机制。研究发现：①高社会创业活跃度的驱动机制分为两条路径,即政策-规范-价值观型和规范-价值观-教育型。第一条路径是正式制度与非正式制度要素间的联动匹配,第二条路径是非正式制度要素间的联动匹配;②非正式制度在影响人们社会创业选择时具有重要作用,影响程度甚至超过了正式制度;③政府政策与创业教育之间具有替代作用,即当社会规范与文化价值观水平较高时,只要拥有完善的政府政策,或者良好的创业教育,就能驱动形成较高的社会创业活跃度;④非高社会创业活跃度的驱动机制分为4条路径,且与高社会创业活跃度的驱动路径存在非对称性关系。     

Capitalism and democracy at a crossroads: the civilizational dimension

This paper evaluates Schumpeter's grand vision as reflected in his Capitalism, Socialism and Democracy, and elaborates it in conjunction with the so-called “globalization” trends characteristic of the wake of the twenty-first century. In addition to the evolutionary nature of his methodology, the institutionalist dimension of Schumpeter's definitions are brought to light. A case is made for a fundamental process of “uncreative destruction” as far as the institutional setup of the economy is concerned. The contention of this paper is that there is ample support in Schumpeterian analysis for a counterpoint to the liberal thesis that envisages the worldwide spread of individualism, market economies, and democratic forms of government.     

我国农村金融机构的基本事实、发展模式及政策取向

近些年来，在我国农村的正规金融机构采取了以商业化、市场化为导向的改革，由此造成了正规金融供给不足，而非正规金融机构的地位和作用得到强化？如何处理两者的关系？本文认为：应该允许两者同时存在，并且通过政策引导使它们建立一种合理的垂直分工体系，从而充分发挥各自的优势。     

Ethnic conflict and economic disparity: Serbians and Albanians in Kosovo

Using the Living Standards Measurement Study (LSMS) household survey from post-conflict Kosovo, we investigate the comparative economic well-being of Serbs and Albanians. An Oaxaca decomposition shows Serb households are both better endowed with income generating characteristics, such as education, and receive higher returns to these characteristics than Albanian households. Despite these advantages, Serb households have lower living standards, on average, than Albanian households. Most of the difference in living standards between Serb and Albanian households is due to unobserved non-economic factors. This result has serious implications for the political economy of policymaking in post-conflict Kosovo. Journal of Comparative Economics 34 (4) (2006) 754–773.     

The political economy of redistribution under democracy

We ask what redistributions of income and assets are feasible in a democracy, given the initial assets and their distribution. The question is motivated by the possibility that if redistribution is insufficient for the poor or excessive for the rich, they may turn against democracy. In turn, if no redistribution simultaneously satisfies the poor and the wealthy, democracy cannot be sustained. Hence, the corollary question concerns the conditions under which democracy is sustainable. We find that democracies survive in wealthy societies. Conditional on the initial income distribution and the capacity of the poor and the wealthy to overthrow democracy, each country has a threshold of capital stock above which democracy survives. This threshold is lower when the distribution of initial endowments is more equal and when the revolutionary prowess of these groups is lower. Yet in poor unequal countries there exist no redistribution scheme which would be accepted both by the poor and the wealthy. Hence, democracy cannot survive. As endowments increase, redistribution schemes that satisfy both the poor and the wealthy emerge. Moreover, as capital stock grows the wealthy tolerate more and the poor less redistribution, so that the set of feasible redistributions becomes larger. Since the median voter prefers one such scheme to the dictatorship of either group, democracy survives.We would like to thank, Daron Acemoglu, Marco Basetto, Alberto Bisin, V.V. Chari, Pat Kehoe, Onur Ozgur for very useful comments.     

The curse of aid

Foreign aid provides a windfall of resources to recipient countries and may result in the same rent seeking behavior as documented in the “curse of natural resources” literature. In this paper we discuss this effect and document its magnitude. Using panel data for 108 recipient countries in the period 1960–1999, we find that foreign aid has a negative impact on institutions. In particular, if the foreign aid over GDP that a country receives over a period of 5 years reaches the 75th percentile in the sample, then a 10-point index of democracy is reduced between 0.5 and almost one point, a large effect. For comparison, we also measure the effect of oil rents on political institutions. We find that aid is a bigger curse than oil.     

Development, democracy, and mass killings

Using a newly assembled dataset spanning from 1820 to 1998, we study the relationship between the occurrence and magnitude of episodes of mass killing and the levels of development and democracy across countries and over time. Mass killings appear to be more likely at intermediate levels of income and less likely at very high levels of democracy. However, the estimated relationship between democracy and probability of mass killings is not linear in the full sample. In the XXth century, discrete improvements in democracy are systematically associated with episodes involving fewer victims.When human lives are endangered, when human dignity is in jeopardy, national borders and sensitivities become irrelevant. Whenever men or women are persecuted because of their race, religion, or political views, that place must—at that moment—become the center of the universe. – Elie Wiesel– Nobel Prize acceptance speech, 1986.     

Why does democracy need education?

Across countries, education and democracy are highly correlated. We motivate empirically and then model a causal mechanism explaining this correlation. In our model, schooling teaches people to interact with others and raises the benefits of civic participation, including voting and organizing. In the battle between democracy and dictatorship, democracy has a wide potential base of support but offers weak incentives to its defenders. Dictatorship provides stronger incentives to a narrower base. As education raises the benefits of civic engagement, it raises participation in support of a broad-based regime (democracy) relative to that in support of a narrow-based regime (dictatorship). This increases the likelihood of successful democratic revolutions against dictatorships, and reduces that of successful anti-democratic coups.     

Infrastructures, incentives, and institutions: Fostering distributed knowledge bases for the learning society

While much attention has been devoted to information and communication technologies, a more fundamental change at the start of the new millennium is the increasing importance of innovation for economic prosperity and the emergence of a learning society. The analysis in this paper shows that innovation should be understood as a broad social and economic activity: it should transcend any specific technology, even if revolutionary, and should be tied to attitudes and behaviors oriented towards the exploitation of change by adding value.We build on the idea of inclusive learning, which entails a process of shared prosperity across the globe following local specific conditions, and argue that it is crucial to understand the features of knowledge-induced growth in rich countries, as well as the challenges and opportunities for late-industrialized and less-developed countries. To achieve these objectives, we emphasize the relative importance of infrastructures and incentives, but considering the increasingly important role of institutions towards the development of social capital. This is because learning societies will increasingly rely on “distributed knowledge bases” as a systematically coherent set of knowledge maintained across an economically and/or socially integrated set of agents and institutions.This broad concept has motivated the work behind the present paper, which builds on material presented at the 5th International Conference on Technology Policy and Innovation (ICTPI), which was held in Delft, The Netherlands, in June of 2001. Under the broad designation of “critical infrastructures,” the Conference brought together a range of experts to discuss technology, policy and management in a context much influenced by the dynamics of the process of knowledge accumulation, which drives learning societies. Thus, this special issue includes a set of extended contributions to the Delft conference, and the aim of this introductory paper is to set the stage for these contributions, with an original contribution on possible views on the role critical infrastructures play to foster innovation in the learning society.