The growth effect of democracy and technology: An industry disaggregated approach.

Abstract The theoretical and empirical sides of democracy-growth literature fail to offer a consensus on the impact of democracy on growth. This paper provides a disaggregated manufacturing approach that reveals different effects of democracy across industries within countries. I surmise that the interplay between democracy and technological development is crucial to the economic performance of industries. A panel dataset of 61 manufacturing industries from 72 countries between 1990 and 2010 is employed, along with a wide variety of democracy measures. The results point to a technologically-conditioned effect of democracy. Political regime changes towards democracy are growth-enhancing for industries close to the World Technology Frontier but have a negative effect on backward industries. This evidence is robust to specification changes and alternative estimation techniques, and prevails once the possible dynamics of manufacturing growth are tackled. Highlights • I propose a disaggregated approach for studying the growth effect of democracy. • I surmise that the growth effect of democracy depends on technological development. • Democracy exerts a pro-growth effect on technologically advanced industries. • However, the same institutional changes harm backward industries. • The result is robust to alternative democracy proxies and estimation techniques. [ABSTRACT FROM AUTHOR]