Norris 1
DPI 403 Class 3
The impact of democracy on
economic growth and social
welfare
Norris 2
P i
Previous
classes
l
1.
2
2.
Overview and roadmap
Can democratization be strengthened by
the international community?


Barbara Wejnert: international forces
outweigh domestic factors
What strategies are used? Menu of
alternative types of interventions.
Norris 3
P
li cycle
l
Policy
Policy
advocacy
Policy
implement
ation
Policy
analysis
Policy
options
Norris 4
Impact of
democratic
governance
1.Economic
growth
‘Yes’
Rodrik et al
‘No’
Przeworski et
al
2. Social
welfare
3. Peace
(next class)
‘Yes’
Siegle et al
‘Yes’ Norris
‘No’ Ross
‘No’
No Mansfield
& Snyder
Norris 5
R di
Readings
Dani Rodrik Institutions Rule?
 Adam Przeworski Institutions Matter?
 Michael Ross Democracy good for the
poor?
 Haerpfer Ch 8 Democracy and capitalism

Norris 6
St t
Structure:
advocacy
d
debate
d b t
I.
Context: does democratic g
governance matter
instrumentally for development?
II
II.
Does democratic governance lead to
economic growth?
III
III.
Does democratic governance lead to social
welfare?
IV.
Discussion exercise
V.
[[Next class]] Does democracyy lead to peace?
p
Norris 7
I Context: Does
I.
democratic governance
matter instrumentally for
development?
Norris 8
UN Millennium Development Goals
1.
2.
3.
4.
5
5.
6.
7.
8.
Eradicate Poverty & Hunger
Achieve Universal Primary Education
Promote Gender Equality
Reduce Child Mortality
Improve Maternal Health
Combat HIV AIDS, Malaria and Other Diseases
Ensure Environmental Sustainability
y
Develop a Global Partnership for Development
A
Agreed
d UN GA S
Septt 2000
2000. Target
T
t deadline:
d dli
2015
Norris 9
Annual growth in real GDP per capita
3
2
(percent)
Annual AverageReal GDPper CapitaGrowth
hRate
2.5
1.5
1
0.5
0
1820-70
1870-1913
1913-50
1950-73
1973-2001
Real GDP per Capita Mean Ratios
1820 1913 1950 1960 1970 1980 1990 2001 2005*
Mean of Top 10 to Mean of
Bottom 10 Countries
3
7
21
21
23
27
34
47
50
Mean of Top 20 to Mean of
Bottom 20 Countries
2
5
14
15
18
22
27
35
37
2001-2005
Norris 10
Yet persistence of extreme poverty
50
45
45
46
39
40
33
35
30
25
30
28
1990
21
17
15
11
10
5
2001
20
20
10
10
5
2 3
0
0
2
0
Developing N. Africa
Subcountries
and
Saharan
and
W.Asia
Africa
transition
economies
i
Latin
America
and Carib
E Asia
S Asia
SE Asia
and
Oceania
CIS
Note: % Pop living on less than $1/day, 1990-2001. High income nations are excluded.
Source: Millennium Development Goals Report 2005
Balkans
Norris 11
G
Growth
th off USAID spending
di
Norris 12
II. Does democratic
governance lead to
economic growth?
Norris 13
D
b t about
b t th
Debate
the iimpactt
Impact of
democratic
governance
Economic
growth
Social welfare
Peace
(next class)
‘Yes’
R d ik ett all
Rodrik
‘Yes’
Si l ett all
Siegle
‘Yes’ Norris
‘No’
No
Przeworski et
al
‘No’ Ross
‘N ’ M
fi ld
‘No’
Mansfield
& Snyder
Norris 14
R d ik ett all ‘Institutions
Rodrik
‘I tit ti
Rule’
R l ’
Trade
(markets)
Geography
(Climate,
resources,
transport, health,
communications,
i ti
agriculture)
Institutions
(property rights,
rule of law)
Economic
growth
Endogeneity? Reverse causality? Instrumental variables
Norris 15
R d ik model
Rodrik
d l
Income level
(GDP per capita
Integration
(ratio trade/GDP)
Geography
(distance from
equator)
Institutions.
Norris 16
Norris 17
I tit ti
Institutional
l variables
i bl
Institutions= property rights and rule of law
 Measured by Kaufmann-Kray/World
Kaufmann Kray/World Bank
 Settler mortality rates (Acemoglu 2001)
 Instruments
I t
t are measured
d by
b settler
ttl
mortality rates (79 nations) and by %
speaking
ki W
Westt E
European llanguages (137
nations)

Norris 18
Norris 19
Norris 20
R d ik Conclusions
Rodrik
C
l i





“The q
quality
y of institutions trumps
p everything
y
g
else. Once institutions are controlled for,
integration has no direct effect on incomes, while
geography has at best weak direct effects.”
ff
p135.
Alt
Alternative
ti measures, robust
b t results
lt
Instrument not an explanation: colonial history?
Policy implications? ‘Not much at all’ (!) eg
varied property rights in China and Russia
St
Strengths
th and
d limits
li it off this
thi account?
t?
Norris 21
D
b t about
b t th
Debate
the iimpactt
Impact of
democratic
governance
Economic
growth
Social welfare
Peace
(next class)
‘Yes’
R d ik ett all
Rodrik
‘Yes’
Si l ett all
Siegle
‘Yes’ Norris
‘No’
No
Przeworski et
al
‘No’ Ross
‘N ’ M
fi ld
‘No’
Mansfield
& Snyder
Norris 22
P
Przeworski
ki ett al.
l ‘No’
‘N ’



Adam Przeworksi, Michael Alvarez, Jose
Cheibub and Fernando Limogi. 2000.
Democracy and Development. (CUP) Ch3
Does democracy undermine growth?
Growth rates of productive inputs
 Investment
share in GDP
 Probit model controlling for income, Britcol, religion

Unit of measurement: type of regime per year
1950 1990 (di
1950-1990
(dictatorship
t t hi v. d
democracy))
Norris 23
P
Przeworski
ki ett al.
l


Conclusions: “There is no trade-off between democracy
and development, not even in poor countries.” p178.
In poor countries (with incomes below $3
$3,000),
000) the two
regimes are almost identical in their:






Investment shares
Growth of capital stock
Growth of labor force
Output per worker
P d t wages
Product
Democracy need not be sacrificed to economic
development
Norris 24
P
Przeworski
ki ett al.
l


Yet important distinction between rich and poor nations
Poor nations invest little, get little value from total factor
productivity
p
y and p
pay
y low wages
g




Most poor nations remain poor
Regimes make no difference for growth
Democracy is fragile in poor nations so most have dictatorships
More affluent nations ($2500-3000+)


Total growth rates similar for dictatorships and democracies
Yet reasons for growth differ…


Wealthy dictatorship grow by using a lot of labor and paying low
wages (repressing unions) – labor-intensive productivity, higher
birth rates/fertility but shorter longevity (esp. for women)
Wealthy democracies grow by using labor more effectively: slower
population
l ti and
d llabor
b growth
th rates
t b
butt hi
higher
h wages, b
benefit
fit more
from technical progress
Norris 25
P
Przeworski
ki ett al.
l conclusions
l i





The kind of regime does not affect the rate of
investment, the growth of capital stock (p153), or
the growth of total income (p156)
“There is no trade-off between democracy and
d
development,
l
t nott even in
i poor countries.”
ti ”P
P.178
178
“Much ado about nothing.”
Strengths and limits of this account?
Why the contrasts with Rodrik’s account?
Norris 26
III. Does democracy
lead to social welfare?
Norris 27
D
b t about
b t th
Debate
the iimpactt
Impact of
democratic
governance
Economic
growth
Social welfare
Peace
(next class)
‘Yes’
R d ik ett all
Rodrik
‘Yes’
Si l ett all
Siegle
‘Yes’ Norris
‘No’
No
Przeworski et
al
‘No’ Ross
‘N ’ M
fi ld
‘No’
Mansfield
& Snyder
Norris 28
R
Ross
‘N
‘No’’





AJPS 2006
Is democracy good for the poor?
Democracy is linked to higher spending on
health, education, and social security
Yet “Democracy
Democracy has little or no effect on infant
and child mortality.”
Previous
e ous stud
studies
es fail
a to co
control
t o for
o cou
countryty
specific effects and for global health trends, and
they have sample bias (autocratic states often
have missing data)
Norris 29
R
Ross’s
’ model
d l








168 states 1970-2000 p
pop
p over 200,000
,
5 year panels
Dep var=logged infant and child mortality
Independent var=Polity IV democracy-autocracy scale
Control for income, pop density, econ growth, HIV-Aids
Missing data imputed (Amelia)
(
)
OLS panel-corrected Standard Errors (PCSE) and
lagged dependent var
A fixed effects model (controls for country-specific
effects but underestimates sig of slow/stable vars)
Norris 30
Ross
No relationship between type of regime
and infant/child mortality
y rates
 Why? “We know little…”
 Incomplete information by voters?
 Weak channels of accountability?
 Strengths and weaknesses of this study?

Norris 31
D
b t about
b t th
Debate
the iimpactt
Impact of
democratic
governance
Economic
growth
Social welfare
Peace
(next class)
‘Yes’
R d ik ett all
Rodrik
‘Yes’
Si l ett all
Siegle
‘Yes’ Norris
‘No’
No
Przeworski et
al
‘No’ Ross
‘N ’ M
fi ld
‘No’
Mansfield
& Snyder
Norris 32
Si l ett all ‘Y
Siegle
‘Yes’’







From Morton Halperin, Joseph Siegle and Michael Weinstein. 2005.
The Democracy Advantage NY: Routledge
Democracies consistently out-perform autocracies in the developing
world
Classify regimes by Polity IV index
Compare low-income nations (GDP under $2000 constant 1995
dollar terms)
World Bank data 1960-2001
No difference found in levels of economic growth
Better measures of well-being


Life expectancy,
Lif
t
access to
t clean
l
water,
t literacy,
lit
health
h lth services,
i
infaqnt
i f
t
mortality
Avoid humanitarian crisis and severe economic contractions
Norris 33
Halperin, Siegle and Weinstein
Classification of nations
Compare all nation states 1960 to 2001
 Low
Low-income
income nations (per capita less than
$2000)
 Contrast low
low-income
income autocracies and
democracies
 Classification
Cl
ifi ti b
by P
Polity
lit IV

Ref: Halperin, Siegle and Weinstein
Norris 34
Halperin, Siegle and Weinstein
Concepts
Democracy: “Governance systems in
which national leaders are selected
through free and fair elections, there are
institutions that foster a shared distribution
of power, and citizens have extensive
opportunities
pp
to p
participate
p
in p
political life.”
 Polity IV democracy index

Norris 35
U P
Use
Polity
lit IV iindex
d


Rates 161 states every year since 1800
0-10 scale

Constraints on the chief executive (1-4)


The competitiveness of executive recruitment (1-2)




(Opportunities for non-elites to attain executive office)
The
e co
competitiveness
pet t e ess o
of popu
popular
a pa
participation
t c pat o ((1-3)
3)


(Extent to which chief executive is chosen through competitive elections)
The openness of executive recruitment (1)


(Independence of the chief executive)
(Extent to which non-elites are able to access institutional structures for political expression)
Democracies: score 8 to 10
Intermediary states: 3 to 7
Autocracies: score 0 to 2
Norris 36
Norris 37
Halperin, Siegle and Weinstein
Economic Growth


Among all countries, democracies have realized
consistently higher levels of economic growth
from 1960-2001
1960 2001 (2
(2.3%
3% vs
vs. 1
1.6%).
6%)
Among low-income countries, no difference in
per capita growth in GDP between democracies
and autocracies (1.5% to 1.3%) (confirms
Przeworski)



When East Asia is removed, the authoritarian growth
rate of growth drops while the democratic rate
remains steady
Low income democracies have less volatile growth
Note: prob. of missing/unreliable data for autocracies
Norris 38
Halperin,
p
, Siegle
g and Weinstein
Economic indicators
3 26
3.26
35
3.5
3
3.16
2.66
25
2.5
2
Autocracy
Mixed
Democracy
15
1.5
1
1
0.74
0.5
0
-0.5
PerCap GDP Growth
1975-2002
-0.15
GNP Annual Growth 1975-95
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC: 35 Autocracies, 25 Mixed, 16 Democracies
Norris 39
Halperin, Siegle and Weinstein
East Asian exceptionalism?

What of S. Korea, Taiwan, Singapore,
Vietnam, Indonesia and China? Rapid
growth under autocracies. Exceptions.
Why?







Pursuit
P
it off market
k t economics
i
Access to capital markets
Constraints on leaders
Relative social equality
Openness to Western markets
Security interests
Also failures (Burma, Cambodia, N. Korea)
Norris 40
Halperin, Siegle and Weinstein
Social indicators

On average, low income democracies
consistently have superior levels of welfare
across various measures of human development







Life expectancy
Secondary school enrollment
Agricultural production
Childhood mortality
HDI
Growing divergence in recent decades
Due to greater effectiveness NOT higher welfare
spending (eg education)
Norris 41
Halperin,
p
, Siegle
g and Weinstein
Social Indicators
140
114 116
120
100
0
107
90
75 74
80
67
60
60
54 55
43
40
29
20
0
Aids/100000
InfantMortality
ChildMortality
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
LifeExp
Autocracy
Mixed
Democracy
Norris 42
Halperin,
p
, Siegle
g and Weinstein
Social Indicators
140
114 116
120
100
0
107
90
75 74
80
67
60
60
54 55
43
40
29
20
0
Aids/100000
InfantMortality
ChildMortality
Note: Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
LifeExp
Autocracy
Mixed
Democracy
Norris 43
Halperin,
p
, Siegle
g and Weinstein
Government expenditure
30
25
24.5
22.9
9
20.2
20
Autocracy
Mixed
Democracy
15
9.7
10
4 2 3.5 4.1
4.2
41
5
2.7 2
1.6
10.5
3.2
0
Central Govnt
Educ
Military
Spending & aid as % GDP.
Poor nations only (GDP/cap under $2000)
Polity DEMOC 35 Autocracies, 25 Mixed, 16 Democracies
Aid rec
rec'd
d
Norris 44
Wh ? Pl
Why?
Plausible
ibl reasons?
?







Democratic leaders incentives to respond to
social needs
Ch k and
Checks
db
balances
l
Open flow of information
L
Less
corruption
ti
Adaptability and smooth succession
Commitment to rule of law
Feedback learning, trial-and-error
Norris 45
Halperin, Siegle and Weinstein
Policy implications?
Multilateral agencies should prioritize democracies
by…
1.
Use democratic conditionality when allocating aid

2
2.
3.
3
4.
5.
Eg MCA
Revise
R
i charters
h t
WB
WB, IMF & regional
i
lb
banks
k tto ffavor
democratic regimes
Use de
democracy-impact
oc acy pact state
statements
e ts
Separate security aid from development aid
Develop cohesive Development Policy coordination
Council (Sec State, Treasury, MCA, USAID)
Norris 46
IV. What are the policy
implications?
Norris 47
Ad
Advocacy
d
debate:
b t






You are asked to break up into discussion pairs.
You have 15 minutes allocated for the paired discussions.
You are asked to draw upon the readings for this class and your
own arguments and experience.
For policy advocacy, you should either argue for or against the
proposition that democratic governance reduces poverty and
improves welfare.
Give a series of reasons, ranked in importance using the template
overleaf, supported by evidence or case illustrations wherever
possible.
After 15 minutes, we will compare the reasons for or against the
proposition in plenary, to see if a consensus emerges.
Norris 48
T
Template
l t
PRO: Reasons whyy democratic ggovernance reduces p
povertyy and Evidence,, examples,
p , support
pp for this claim
strengthens social welfare.
1
2
3
4
5
6
7
CON: Reasons why democratic governance fails to reduce poverty Evidence, examples, support for this claim
and strengthen social welfare.
1
2
3
4
5
6
7
Norris 49
Next class
Does democracy lead
peace dividend?
to a p
Class Materials: www.pippanorris.com