The impact of state power on economic growth rates in OECD countries

Inspired by public choice theories — in particular the work of Bernholz, Downs, Olson and Tullock — two propositions are advanced. First, the older a democracy is, the slower its growth rates should become. Second, the higher the social security spending is, the slower economic growth rates should become. Pooled regression analysis and the growth experience of 19 OECD nations between 1960 and 1985 allow for an empirical test. Unfortunately, results very much depend on a technical issue, i.e., on the inclusion or exclusion of period and country dummy variables. It is argued that inclusion of the dummies is misleading. If you accept these arguments, then the propositions linking age of democracy or social security transfers on the one hand and lower economic growth rates on the other hand are confirmed.