Political regimes and publicly provided goods: why democracy needs development
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While most of the theoretical literature suggests that democracy promotes the provision of public goods, the findings of empirical studies are inconclusive. Drawing on a simple model, this paper aims at reconciling theory and evidence. We argue that the stronger dependence of more democratic governments upon public support has two opposing effects: on the one hand, it encourages these governments to increase goods provision in order to generate more loyalty. On the other hand, it raises the leaders’ incentives for kleptocratic behavior. The model predicts that the latter effect may dominate in poor countries. In countries with higher income levels, democracy is expected to increase public goods provision. Utilizing 11 indicators of education, health, infrastructure and governance both hypotheses are confirmed by panel regressions including 154 countries over the period from 1960 to 2014. We also show that the omission of per capita income as a moderator variable of democracy may result in small and insignificant empirical estimates.
KeywordsPublicly provided goods Public goods Democracy Political regimes
JEL classificationH11 H40 H51 H52 H54
I thank Alexander Kemnitz for helpful discussions. I also thank the editor William F. Shughart II, three anonymous reviewers, the participants of the 16th Public Finance Seminar at WZB Berlin and the participants of the seminar at TU Dresden for their comments and suggestions.
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