Morning Must-Read: Acemoglu, Naidu, Robinson, and Restrep: Democracy and Growth

**Daron Acemoglu, Suresh Naidu, James A. Robinson, and Pascual Restrepo:** Democracy and Growth: New Evidence: “A country that switches from non-democracy to democracy…

>…achieves about 20% higher GDP per capita over the subsequent three decades… between 1960 and 2010…. These are large but not implausible effects, and suggest that the global rise in democracy over the past 50 years (of over 30 percentage points) has yielded roughly 6% higher world GDP…. We predict the probability of democratizing based on 4 years of GDP, and then reweight country-years so that we are effectively comparing the path of GDP following a democratization with the path of GDP following an ‘almost democratization’…. We develop an instrument for democracy based on regional waves of democratization…. The IV coefficients are much larger than the OLS coefficients compared to our measure, suggesting that we have reduced the measurement error in the democracy variable….

>David Brooks defending the Egyptian military coup: ‘It’s not that Egypt doesn’t have a recipe for a democratic transition. It seems to lack even the basic mental ingredients.’ Judge Posner also agrees with this conclusion and writes: ‘Dictatorship will often be optimal for very poor countries. Such countries tend not only to have simple economies but also to lack the cultural and institutional preconditions to democracy.’ Is there any evidence that democracy is only good for already developed economies? The answer is no…. So why does democracy increase growth?… We find that civil liberties are what seem to be the most important. We also find positive effects of democracy on economic reforms, private investment, the size and capacity of government, and a reduction in social conflict…