democracy, government spending, and economic growth a political-economic explanation of the barro-effect文档.pdfVIP

Public Choice 117: 27–50, 2003. 27 © 2003 Kluwer Academic Publishers. Printed in the Netherlands. Democracy, government spending, and economic growth: A political-economic explanation of the Barro-effect ∗ THOMAS PLÜMPER CHRISTIAN W. MARTIN Department of Politics and Management, University of Konstanz, D-78457 Konstanz, Germany; e-mail: thomas.pluemper@uni-konstanz.de Accepted 4 November 2002 Abstract. The paper develops a political economic argument for the recently observed inverse u-shaped relation between the level of democracy and economic performance. A model is constructed that shows why and how political participation influences the spending behavior of opportunistic governments that can choose an optimal combination of rents and public goods to attract political support. If the level of democracy remains comparably low, governments rationally choose rents as an instrument to assure political support. With increasing democratic participation, however, rents become an increasingly expensive instrument while the provision of public goods becomes more and more efficient in ensuring the incumbent government’s survival in power. As a consequence, an increase in democracy tends to raise growth rates of per capita income. However, the beneficial impact of democracy on growth holds true only for moderate degrees of political participation. If – in semi-democratic countries – political participation increases further, governments have an incentive to over-invest in the provision of public goods. This model allows to derive and test three hypothesis: Firstly, based on a simple endogenous growth model, we empirically substantiate our hypothesis of a non-linear, inverse u-shaped relation between the level of democracy and growth of per capita income. Secondly, we show that the impact of government spending on ec