Part of the BIPR International Economic Series – this seminar was brought to us by Professor Nauro Ferreira Campos on his latest paper titled 'The Political U – New Evidence on Democracy and Growth', co-authored with Professors Fabrizio Coricelli and Marco Frigerio. In this paper Campos questions the linear relationship between democracy and economic development and seeks to bridge the gap between economics and political science on the topic. The aims of the paper include critically taking stock of the current knowledge on democracy and growth, theorizing that the relationship between democracy and economic growth is non-linear, and discussing the analysis of the relationship that includes more countries and a longer timeframe than previous analysed in the current literature.

The current work on the relationship between democracy and economic growth uses primarily a binary indicator of democracy, and only a minority of the literature entertains the possibility of a non-linear relationship. Campos's analysis expands on the idea of a non-linear relationship, using a continuous spectrum of regime type (rather than only the binary indicator), and addressing the question of if countries start with economic growth and move towards to political development – or the other way around. Most authors in current literature claim that political development comes first and estimate nearly a 20% increase per capital GDP (in the long run) as an effect of democracies; as well as benefits such as beneficial structural reforms, tax revenues, and higher education levels. But are these economic benefits of democracy as causal as the current literature and mainstream thought might suggest?

To answer this question Campos studies the yearly data from 162 countries from 1960-2018, using two measures of political development (polity and VDEM), and a binary and continuous measurement of democracy –considering 3 regimes instead of two – democratic, autocratic, and an intermediate hybrid regime termed anocracy. The study results in what Camos calls a 'Political U' – a nonlinear relationship between polity and economic development. On the graph with the polity variable on the Y axis and the electoral democracy index on the X axis, rather than a linear pattern, an upright U shape emerges. This indicates that the relationship between democracy and economic development is not as straightforward as previously assumed. This outcome also emphasises the impact hybrid regimes have on economic development – namely, that the regimes in the middle of the electoral democracy index (anocracies in the hybrid region) have the poorest performing economies.

Campos concludes the talk by discussing how focusing on the behaviour of the hybrid political regimes can help to bridge the gap between economics and political science and argues that both democracies and autocracies limit the scope for political instability, thereby increasing economic wellbeing. It is also significant that the results of this study do not contradict the previous literature (that democracies are better than non-democracies) but instead complements and expands upon the relationship between democracy and economic development. The concept of a U-shaped relationship between political and economic development is also valuable in gaining a better understanding of history, with the realization that the relationship is non-linear but more nuanced and dependent on regime type - specifically hybrid regimes – than previously thought.

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Full Audio:

International Economics Series

hosted by Professor Michael G. Plummer


SAIS Europe students, faculty, staff, and guests are allowed to attend in person at SAIS Europe, via B. Andreatta 3, Bologna. To participate online, please register for the webinar.

Nauro F. Campos is Professor of Economics at University College London and Research Professor at ETH-Zürich. His main fields of interest are political economy and European integration.

He taught previously at CERGE-EI (Prague), California (Fullerton), University of Newcastle, Brunel, Paris 1 Sorbonne and Warwick. He was a visiting Fulbright Fellow at Johns Hopkins University (Baltimore), a Robert McNamara Fellow at The World Bank, and a CBS Fellow at Oxford University.

He is a Research Fellow at IZA-Bonn, a Professorial Fellow at UNU-MERIT (Maastricht University), a member of the Scientific Advisory Board of the (Central) Bank of Finland, and a Senior Fellow of the ESRC Peer Review College. He was a visiting scholar at the University of Michigan, ETH, USC, Bonn, UCL, Stockholm, IMF, World Bank, and European Commission. From 2009 to 2014, he was seconded as Senior Economic Advisor/SRF to the Chief Economist of the UK's Department for International Development.

He received his Ph.D. from the University of Southern California (Los Angeles) in 1997, where he was lucky enough to learn about institutions from Jeff Nugent and Jim Robinson and (more than) happy to be Dick Easterlin's RA. He is the editor in chief of Comparative Economic Studies (journal of the Association for Comparative Economic Studies) and of Cambridge University Press' book series Cambridge Elements on the Economics of European Integration.