Do Democratic Transitions Produce Bad Economic Outcomes?

Several influential commentators have suggested recently that democratization in developing countries produces political instability, ethnic conflict, and poor economic outcomes. The authors of this paper show that the data do not support the view that democratization is bad for economic performance. Our analysis reveals that major democratic transitions have, if anything, a positive effect on economic growth in the short run. This is especially true for the poorest countries of the world and those that are marked by sharp ethnic divisions. Democratizations tend to follow periods of low growth rather than precede them. Moreover, democratic transitions are associated with a decline in growth volatility. Systematic analysis therefore uncovers a picture that is considerably more favorable to democratization.