The Political Determinants of Economic Performance

Political Competition and the sources of growth

Abstract: The authors present and test a theory about the effects of political competition on the sources of economic growth. Using Mankiw, Romer, and Weil’s model of economic growth and data for roughly 80 countries, the authors show that political competition decreases the rate of physical capital accumulation and labor mobilization but increases the rate of human capital accumulation and (less conclusively) the rate of productivity change. The results suggest that political competition systematically affects the sources of growth, but those effects are cross-cutting, explaining why democracy itself may be ambiguous. These findings help clarify the debate about regime type and economic performance and suggest new avenues for research.

Key Words: political competition economic growth human capital productivity investment

Regression results not reported in published version of paper:

Table 1: Effect of Political Competition on Investment

Table 2: Effect of Political Competition on Labor Supply

Table 3: Effect of Political Competition on Secondary Education Enrollment

Table 4: Effect of Political Competition on Contribution of Investment to Growth

Table 5: Effect of Political Competition on Foreign Direct Investment

Table 6: Effect of Political Competition on Trade

Replication Data: download. See article for data description, sources and models.