Democracy Level and Its Impact on Economic Development
Democracy Level and Its Impact on Economic Development

Summary/Abstract: While there are benefits of democracy, not all democracies are the same. Consistent with previous findings, we find democracy positively affects economic development in general. However, after we classify democracy into different levels, we find a high democracy level positively affects economic development more than the low and mid democracy level. We find both high and low democracy levels have further enhanced the positive effect of higher political rating (lower political risk) on economic development. Consistent with previous findings, we find high population growth negatively affects economic development overall. A high democracy level, however, helps mitigate the negative effect of higher population growth on economic development while low democracy level enhances the negative effect further. We find the democratic level does matter more for the economic development of developing economies compared to developed economies. We find the democratic level helps contribute to the positive relationship between lower political risk and economic development of developing economies. However, if the democratic level of the developing economies is low, higher population growth will further enhance the negative effect of high population growth on economic development. Therefore, the democratic level does matter for economic development and channels through which democracy level affects economic development, especially for the developing economies.

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