Papaiannou and Siourounis (2008) Flashcards
Empirical memorisation.
What is the research objective for Papaiannou and Siourounis (2008)?
To assess the average growth effect of successful democratisation via the change in annual per capita real GDP growth.
What is the main hypothesis of Papaiannou and Siourounis (2008)?
A permanent democratisation, despite the short-run costs associated with the J-curve effect, should lead to long-run growth improvements over non-democratised counterparts.
What are the findings of Papaiannou and Siourounis (2008)?
When taking both fixed country and period effects into account, a permanent democratisation is associated with a one-half to one per cent improvement in annual real per capita GDP growth.
Are the findings of Papaiannou and Siourounis (2008) consistent with theory?
They are consistent with the predictions of Meltzer and Richard (1981).
They predict, via the Median Voter Thoerem, that democracies redistribute more due to the proportion of enfranchised individuals being 100% of the population. This moves the Median Voter further down the income distribution which incentivises them to favour greater redistribution via a higher preferred tax rate.
Describe the Development channel Papaiannou and Siourounis (2008) outline to interpret their results.
The argument essentially involves democracy acting as a conduit to economic growth.
Firstly, tax revenue gathered via redistributive policies can be used to subsidise education and health services via in-kind public good transfers.
Secondly, democratic institutions are more efficient at minimising transaction costs of sociopolitical organisation. This is due to the pressure elections apply on the incumbent office to perform well. On the other hand, autocracies fall victim to X-inefficiencies akin to monopolies.
Briefly describe the econometric methodology used in Papaiannou and Siourounis (2008).
The dependent variable is the growth of real per capita GDP proxied by the first difference of ln(real per capita GDP).
The independent variable of importance is the difference-in-difference Democracy dummy. There are also a set of growth covariates, namely Government Spending, Investment, and Trade, all (% of GDP).
What do we expect from a regression output table?
We expect the coefficient of Democracy to be positive and significant. Economically, this would mean that, irrespective of natural endowment or global trends, Democracy improves short / long run growth by x.xxxx%.
