Seeds of prosperity? Revisiting the effect of democracy on economic growth

This study identifies and measures the impact of democracy on the real gross domestic product per capita growth rate using the generalized method of moments on an unbalanced panel dataset of 162 states from 1961 to 2023. The results indicate that democracy has a positive and statistically significant impact on economic growth, although the estimated effect is moderate in size. The findings are robust to alternative model specifications and controls, various measures of democracy, and different estimation techniques, but they also show that the magnitude of the effect depends on how democracy is measured. This suggests that democracy should not be understood as an immediate growth trigger, but rather as an institutional condition that can support long-run development when combined with broader economic reforms.