1. Tirsdagsseminaret ved ISV 16/11 2010 Carl Henrik Knutsen ISV, UiO Africa's Growth Tragedy Revisited: Weak States, Strong Rulers

3. Core questions and argument How do democracy and state capacity affect economic growth? Direct, linear effects? Democracy (e.g. Przeworski and Limongi 1993; Przeworski et al. 2000; Baum and Lake 2003; Bueno de Mesquita et al. 2003; Doucouliagos and Ulubasoglu 2008) State capacity (e.g. Wade 1990; Evans 1995; Kohli 2004; Fukuyama 2005; Evans and Rauch 1999) Interaction between state capacity and regime type? The relationship between regime type and growth in Sub-Saharan Africa? Low state capacity in post-colonial Africa Argument: Dictatorship is particularly bad when there are no other institutional restraints on dictator. In weakly institutionalized states, the vertical checks from democratic institutions play vital role in keeping dictators from pursuing “bad policies”.

4. Main results Democracy increases economic growth in Africa The positive effect of democracy on growth is stronger in Africa than globally Democracy’s effect on economic growth depends on state capacity Significant interaction in both African and global samples Democracy has positive growth-effect in weak capacity states The democracy-state capacity interaction contributes to explaining Africa’s growth tragedy Promote democracy in poor, weakly institutionalized countries!

5. Africa’s growth tragedy Economic stagnation in African countries after decolonization, why? The international system, commodity dependence, etc. Ethnic fractionalization (Easterly and Levine, 1997) Climatic and geographical factors (e.g. Sachs) Domestic politics The colonial legacy and structure of state institutions (e.g. Englebert, 2000; Acemoglu et al., 2001) The dominance of neo-patrimonialism/clientilism (e.g. Medard, Chabal and Daloz) Does political regime type matter? Dictatorship and power concentration

6. “Democracy doesn’t fit/work in Africa” Similar arguments for Germany, Catholic countries, Latin America, Asia The relevant comparison: the ideal vs the counterfactual (dictatorship) Optimism early 1990s, pessimism thereafter. Lindberg’s results (2006) “The same leaders are elected..” Candidate selection vs disciplining effects “Neo-patrimonialism survives in democracies” (Chabal and Daloz 1999) True, but inertia does not imply everything is constant Relative power in patron-client relations The size of client-pools likely to increase, with positive economic effects (Bueno de Mesquita et al., 2003)

7. Interaction between weak states and strong rulers Political economy and the incentives of rulers: Why would leaders want to promote growth enhancing policies? Democracies: need to enact popular policies to stay in office In dictatorships: Depends on autonomy and type of winning coallition Alternative institutional checks on dictator (independence, capacity) Other factors: security threats, internal vs external In weakly institutionalized states, dictators are able to enhance political survival and private consumption through “bad policies” Property rights, corruption, and other economic institutions Fiscal policy Markets and industrial policy Monetary policy

10. Robustness checks Random Effects PPP-adjusted GDP Exclude Botswana and Mauritius Control for conflict and post-conflict situations Control other variables (urbanization, trade, etc.) Lags Granger-tests and 2SLS Arrellano-Bond with one and two lags on DV

11. A comparison: “Investigating the Lee thesis…”, EPSR 2(3):451-73. This paper presents the hypothesis that democracy hurts economic growth and development, also known as the Lee-thesis. The paper discusses why one could expect dictatorship to be particularly beneficial for growth in the Asian context, and then presents three general theoretical arguments that support the Lee-thesis. However, the empirical results, based on extensive time series for more than 20 Asian countries, disconfirm the hypothesis that dictatorship increases economic growth in Asia: There is no significant, average effect from democracy on growth. Asian dictatorships do however invest a larger fraction of their GDP than democracies, but they are worse at generating high enrollment ratios in education after primary school.

12. Results from Asia

13. Summing up the empirical results Significant interaction state capacity and democracy Positive effect of democracy on growth in Africa Significant and substantially large effect Democracy matters more for growth in Africa than elsewhere Democracy is particularly beneficial for growth when state capacity is low No significant effect on growth in Asia Positive effect of democracy on some school enrollment measures Negative effect of democracy on capital investment Large variation in economic outcomes among dictatorships