{"insight":{"id":"121544302","lede":"This study does not focus on economic democracy specifically. They draw upon the Freedom House and Polity IV democracy indices to determine whether or not a country is democratic.","slug":"countries-that-switch-from-non-democracy-to-democracy-achieve-about-a-20-increase","title":"Countries that switch from non-democracy to democracy achieve about a 20% increase in GDP per capita over the following 30 years.","showTitleAsQuote":false,"epistemicStatus":"econometric","reports":[{"id":"69359365","title":"Codetermination","slug":"codetermination"}],"tags":[{"slug":"growth","name":"Growth","id":"23932836","lede":"

We define growth as the expansion of wealth in society; growth is about generating a "a bigger pie".

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Amidst debates over the merits of continued growth, we begin with the idea that all else equal, a society with growth, with more wealth, is preferable to one with less. Without growth, society becomes a zero-sum distributional game: anyone's gain is another's loss. Growth (all else equal) enables shared prosperity.

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But there is broad agreement that current measures of growth, such as GDP, are inadequate to the task of providing a suitable proxy to guide further growth. Whether devising improved measures that account for missing elements such as sustainability, equity, leisure time, or digital value, or constructing altogether new proxies (OECD's Better Life Index, for example), the conversation about how best to measure, and thus drive, equitable, regenerative, socially desirable growth is a rich field of debate.

\n","ledeExcerpt":"We define growth as the expansion of wealth in society; growth is about generating a \"a bigger pie\".\n\nAmidst debates over the merits of continued growth, we begin with the idea that *all else equal*, a society with growth, with more wealth, is preferable to one with less. Without growth, society becomes a zero-sum distributional game: anyone's gain is another's loss. Growth (all else equal) enables shared prosperity.\n\nBut there is broad agreement that current measures of growth, such as GDP, are inadequate to the task of providing a suitable proxy to guide further growth. Whether devising revised measures, such as Tyler Cowen's notion of wealth plus\" (GDP, plus measures of leisure time, household production, and environmental considerations), or constructing altogether new proxies (OECD's 'Better Life Index), the conversation about how best to measure, and thus drive, equitable, regenerative, socially desirable growth is a rich field of debate.","featured":true},{"slug":"democracy","name":"Democracy","id":"95836537","lede":"","ledeExcerpt":"","featured":null},{"slug":"gdp","name":"Gross Domestic Product (GDP)","id":"49378752","lede":"

GDP refers to the total value of a nation's production of goods and services.

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The formula for GDP is: consumer spending (C) + business investment (I) + government spending (G) + net exports (X-M). Nominal GDP refers to the unadjusted total, whereas "Real GDP" adjusts that total to account for inflation.

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Simon Kuznets invented the notion in 1937. It has since become the guiding metric to measure not only the volume and value of national production, but the welfare of the nation. Of all the criticisms of such "fetishization of GDP" (Joseph Stiglitz), the simplest may be that given by Kuznets himself, who wrote: "The welfare of a nation can scarcely be inferred from a measurement of national income."

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Thirty years later, Kuznets adds: “Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.”

\n","ledeExcerpt":"GDP refers to the total value of a nation's production of goods and services.\n\nThe formula for GDP is: consumer spending (C) + business investment (I) + government spending (G) + net exports (X-M). Nominal GDP refers to the unadjusted total, whereas \"Real GDP\" adjusts that total to account for inflation.\n\nSimon Kuznets invented the notion in 1937. It has since become the guiding metric to measure not only the volume and value of national production, but the welfare of the nation. Of all the criticisms of such \"fetishization of GDP\" (Joseph Stiglitz), the simplest may be that given by Kuznets himself, who wrote: \"The welfare of a nation can scarcely be inferred from a measurement of national income.\"\n\nThirty years later, Kuznets adds: “Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.”","featured":null},{"slug":"developing-countries","name":"Developing Countries","id":"121520123","lede":"","ledeExcerpt":"","featured":null}],"sources":[{"id":"121544286","lede":"\"We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.\"","link":"https://www.journals.uchicago.edu/doi/abs/10.1086/700936?mobileUi=0&","slug":"democracy-does-cause-growth","kind":"Academic Paper","title":"Democracy Does Cause Growth","year":"2019-01-01","researchers":[{"id":"121544280","location":"Massachusetts Institute of Technology","name":"Daron Acemoglu","seoDescription":"","slug":"daron-acemoglu"},{"id":"121544281","location":"Columbia University","name":"Suresh Naidu","seoDescription":"","slug":"suresh-naidu"},{"id":"121544282","location":"Boston University","name":"Pascual Restrepo","seoDescription":"","slug":"pascual-restrepo"},{"id":"121544285","location":"University of Chicago","name":"James A. Robinson","seoDescription":"","slug":"james-a-robinson"}]}]}}