The Effect of Democracy on Economic Growth essay sample

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Table of Contents



III.Theoretical Framework

IV.Data and Methodology




The topic of influence of democracy on the outcomes of the countries’ economic growth has been frequently discussed in the circles of both scholars and policy-makers within the recent decades. Even though the number of papers basing on this topic is rather abundant, it is rather difficult to find the discussions which are fully consistent between themselves in this literature pillar. Proponents of the notion that democracy is the important driver of growth can say that the democratic environment serves as a major motivation of the citizens of some given country to participate in creating higher amounts of the GDP. That is due to the fact that the climate of liberty, free distribution of information and security of the private property has a potential to facilitate the optimal resource allocation and prevalence of the profit-maximizing activities. Furthermore, democratic regimen were at times found to have a positive influence on businesses through the fact that they limit the interventions of public bodies into the economy (Doucouliagos and Ulubaşoğlu 2008).

However, it is often rather difficult to separate the positive effect created the regime itself from that of some separate markets or institutions. Furthermore, taking into account the rapid pace of economic and political globalization which is currently taking place, it is also possible to assume that the causal relationship between the democracy levels and economic growth is subject to structural changes. Therefore, it should be explored basing on the most recent datasets which reflect the state of democratic environments globally, as well as the statistics of economic growth. In the subsequent sections of this analytical report, the framework of the relationship between democratic developments in the country and economic growth will be addressed. More specifically, the suggested theoretical and empirical models will serve as the instruments to verify, whether democracy indeed has positive influences on the country-level economic growth, or the correlation of this kind is no more than an artifact of the neglect of multifactor analysis. The focus of the research will be made on the sample of the countries – current members of the European Union, both old and newly accepted.

This particular sample is interesting mainly due to the fact that intensive integration processes are very likely to change the patterns by which democracy functions in each of the EU countries. This happens because of the necessity to adjust each individual economic, legislative and social framework to the one which is prevalent in European Union as a whole. The dynamics of the process of transition which emerges in this particular environment can serve as an interesting case study of the changes in various dimensions of democracy, and subsequent shifts in the patterns of economic growth which are related to them.The subsequent component of the current paper will include a brief account of the scholarly literature which exists as of today on the subject of democracy and economic growth. Then, the …

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