Regime Type and Economic Development By James Mazol

Regime Type and Regime Type and Economic Economic DevelopmentDevelopmentBy James MazolBy James Mazol

Research Question and Research Question and BackgroundBackground

Are authoritarian governments better than democracies Are authoritarian governments better than democracies at promoting economic development?at promoting economic development?

Economic Development and Political LegitimacyEconomic Development and Political Legitimacy – – Seymour Martin Lipset (1959)Seymour Martin Lipset (1959) Autocracies superior in organizing and employing resourcesAutocracies superior in organizing and employing resources Less fearful of public opinionLess fearful of public opinion Overall more efficientOverall more efficient

Samuel Huntington’s Theory of a “Directing Agent” Samuel Huntington’s Theory of a “Directing Agent” (1968)(1968) Better and more willing “enforcers”Better and more willing “enforcers” East Asian “Tigers” and ChinaEast Asian “Tigers” and China

HypothesesHypotheses

On average, democracies will be better than On average, democracies will be better than autocracies at promoting economic autocracies at promoting economic developmentdevelopment

As a country’s corruption level decreases, As a country’s corruption level decreases, economic development will increaseeconomic development will increase

As a country’s level of business regulation As a country’s level of business regulation increases, economic development will increases, economic development will decreasedecrease

Independent VariableIndependent Variable Regime Type: Democracy or AutocracyRegime Type: Democracy or Autocracy Source: Freedom House, Source: Freedom House, Freedom in the Freedom in the

World Index 2006World Index 2006 120 electoral democracies120 electoral democracies 45 autocracies45 autocracies

Received 6 or 7 in Political Rights rankingReceived 6 or 7 in Political Rights ranking Freedom House designates 6 or below as Freedom House designates 6 or below as

autocratic governmentautocratic government

Dependent VariableDependent Variable

Components of Economic DevelopmentComponents of Economic Development Overall wealth, growth, distribution, level of Overall wealth, growth, distribution, level of

developmentdevelopment GrowthGrowth – Real GDP growth %, CIA World Factbook, 2006 – Real GDP growth %, CIA World Factbook, 2006 WealthWealth – GDP/capita, International Monetary Fund Index, – GDP/capita, International Monetary Fund Index,

20062006 DistributionDistribution – Gini Coefficient, UN Human Development – Gini Coefficient, UN Human Development

Report, 2006Report, 2006 Development LevelDevelopment Level – – Development List, Triennial Review of Development List, Triennial Review of

UNCTAD (Conference on Trade and Development)UNCTAD (Conference on Trade and Development) 50 countries are classified as Least Developed Countries (LDC)50 countries are classified as Least Developed Countries (LDC) Lowest indicators of socioeconomic development with the lowest Lowest indicators of socioeconomic development with the lowest

Human Development Index ratings of all the countries in the world Human Development Index ratings of all the countries in the world

Data Analysis – Data Analysis – Comparison of MeansComparison of Means

Gini – Nearly the sameGini – Nearly the same Democracies = 41.02Democracies = 41.02 Autocracies = 39.06Autocracies = 39.06

Growth – Autocracies 1/3 higherGrowth – Autocracies 1/3 higher Democracies = 4.6%Democracies = 4.6% Autocracies = 6.96%Autocracies = 6.96%

GDP – Democracies have double the wealthGDP – Democracies have double the wealth Democracies = $12,978Democracies = $12,978 Autocracies = $6380Autocracies = $6380

Data AnalysisData AnalysisReport

12978.750 41.0224 4.6092

120 85 120

12526.440 11.57851 2.22643

6380.2667 39.0583 6.9644

45 24 45

7200.4176 9.62085 6.16165

11179.164 40.5899 5.2515

165 109 165

11681.406 11.16472 3.85873

Mean

N

Std. Deviation

Mean

N

Std. Deviation

Mean

N

Std. Deviation

Electoral Democracyor Autocracy?Electoral Democracy

Autocratic

Total

What isthe GDP

Per Capita($ at PPP)

How Equallyis IncomeDistributed

(100 = perfectinequality)

PercentGDP growth

ANOVA Table

1.4E+009 1 1424944875 11.085 .001

2.1E+010 163 128550408.5

2.2E+010 164

72.193 1 72.193 .577 .449

13390.106 107 125.141

13462.299 108

181.549 1 181.549 13.092 .000

2260.383 163 13.867

2441.932 164

(Combined)Between Groups

Within Groups

Total


Within Groups

Total


Within Groups

Total

What is the GDP PerCapita ($ at PPP) *Electoral Democracy orAutocracy?

How Equally is IncomeDistributed (100 = perfectinequality) * ElectoralDemocracy or Autocracy?

Percent GDP growth *Electoral Democracy orAutocracy?

Sum ofSquares df Mean Square F Sig.

Measures of Association

.252 .064

.073 .005

.273 .074

What is the GDP PerCapita ($ at PPP) *Electoral Democracy orAutocracy?

How Equally is IncomeDistributed (100 = perfectinequality) * ElectoralDemocracy or Autocracy?

Percent GDP growth *Electoral Democracy orAutocracy?

Eta Eta Squared

Regime type and mean GDP Regime type and mean GDP per capitaper capita

Regime type and GDP growthRegime type and GDP growth

Regime type and GiniRegime type and Gini

How much influence does How much influence does regime type have?regime type have?

Evidence does not support hypothesisEvidence does not support hypothesis GDP and Growth statistically significantGDP and Growth statistically significant Gini not statistically significantGini not statistically significant Eta SquareEta Square

GDP (p/capita) - .064GDP (p/capita) - .064 Gini - .005Gini - .005 Growth - .074Growth - .074

Does Democracy Lead to a Does Democracy Lead to a More Developed Country?More Developed Country?

Electoral Democracy or Autocracy? * Is the Country Highly Underdeveloped? Crosstabulation

103 17 120

85.8% 14.2% 100.0%

62.4% 10.3% 72.7%

30 15 45

66.7% 33.3% 100.0%

18.2% 9.1% 27.3%

133 32 165

80.6% 19.4% 100.0%

80.6% 19.4% 100.0%

Count

% within ElectoralDemocracy or Autocracy?

% of Total

Count


% of Total

Count


% of Total

Electoral Democracy

Autocratic

Electoral Democracyor Autocracy?

Total

Either HighlyDevelopedor MediumDeveloped

LeastDeveloped

Country

Is the Country HighlyUnderdeveloped?

Total

Chi-Square Tests

7.691b 1 .006

6.514 1 .011

7.121 1 .008

.008 .007

7.644 1 .006

165

Pearson Chi-Square

Continuity Correctiona

Likelihood Ratio

Fisher's Exact Test

Linear-by-LinearAssociation

N of Valid Cases

Value dfAsymp. Sig.

(2-sided)Exact Sig.(2-sided)

Exact Sig.(1-sided)

Computed only for a 2x2 tablea.

0 cells (.0%) have expected count less than 5. The minimum expected count is 8.73.

b.

Directional Measures

.000 .000 .b .b

.000 .000 .b

.b

.000 .000 .b

.b

.047 .036 .006c

.047 .036 .006c

Symmetric

Electoral Democracy orAutocracy? Dependent

Is the Country HighlyUnderdeveloped?Dependent

Electoral Democracy orAutocracy? Dependent

Is the Country HighlyUnderdeveloped?Dependent

Lambda

Goodman andKruskal tau

Nominal byNominal

ValueAsymp.

Std. Errora

Approx. T Approx. Sig.

Not assuming the null hypothesis.a.

Cannot be computed because the asymptotic standard error equals zero.b.

Based on chi-square approximationc.

Symmetric Measures

.216 .006

.216 .006

165

Phi

Cramer's V

Nominal byNominal

N of Valid Cases

Value Approx. Sig.

Not assuming the null hypothesis.a.

Using the asymptotic standard error assuming the nullhypothesis.

b.

Data AnalysisData Analysis

17 Democracies are LDCs – 14.2%17 Democracies are LDCs – 14.2% 15 Autocracies are LDCs – 33.3%15 Autocracies are LDCs – 33.3% Small Chi-Square, statistically significantSmall Chi-Square, statistically significant Cramer’s V - .216 indicates strong Cramer’s V - .216 indicates strong

relationshiprelationship LDC definition includes more than just LDC definition includes more than just

economic developmenteconomic development

Other factors that may Other factors that may influence developmentinfluence development

Business RegulationBusiness Regulation – World Bank, – World Bank, Doing Business Doing Business Report, 2006Report, 2006 Starting a business indexStarting a business index Countries ranked individually 1-172, with 172 the hardest Countries ranked individually 1-172, with 172 the hardest

Time, cost, K investmentTime, cost, K investment Good indicator of level of overall regulation of businessGood indicator of level of overall regulation of business

Corruption Corruption – Transparency International, – Transparency International, Corruption Corruption Perceptions Index, 2006Perceptions Index, 2006 Draw on expert opinion surveysDraw on expert opinion surveys 1-10 ranking, with 10 = extremely low levels of government 1-10 ranking, with 10 = extremely low levels of government

corruptioncorruption

Corruption CorrelationsCorruption CorrelationsCorrelations

1 -.342** .873** -.227**

.000 .000 .008

136 104 136 136

-.342** 1 -.400** -.213*

.000 .000 .026

104 109 109 109

.873** -.400** 1 -.115

.000 .000 .142

136 109 165 165

-.227** -.213* -.115 1

.008 .026 .142

136 109 165 165

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

How Corrupt is theCountry? (10 = notcorrupt)

How Equally is IncomeDistributed (100 =perfect inequality)

What is the GDP PerCapita ($ at PPP)

Percent GDP growth

How Corruptis the

Country? (10= not corrupt)



What isthe GDP


PercentGDP growth

Correlation is significant at the 0.01 level (2-tailed).**.

Correlation is significant at the 0.05 level (2-tailed).*.

Pearson’s R ResultsPearson’s R Results

GDP p/capitaGDP p/capita = .873 – Very strong positive = .873 – Very strong positive relationshiprelationship R square = .76R square = .76

GDP growth rateGDP growth rate = -.227 – Weak negative = -.227 – Weak negative relationshiprelationship R square = .05R square = .05

Gini CoefficientGini Coefficient = -.342 – Moderate negative = -.342 – Moderate negative relationshiprelationship R square = .12R square = .12

All significant at .01 levelAll significant at .01 level

Interpreting DataInterpreting Data

Evidence partially supports hypothesisEvidence partially supports hypothesis Low levels of corruption lead to wealth, Low levels of corruption lead to wealth,

very strong relationship very strong relationship Cannot say it is a major factor of Cannot say it is a major factor of

development because of moderate development because of moderate negative relationship with Gini negative relationship with Gini

Regression AnalysisRegression Analysis

Linear Regression

2.00 4.00 6.00 8.00

How Corrupt is the Country? (10 = not corrupt)

0.00

20000.00

40000.00

60000.00

What is the GDP Per Capita ($ at PPP) = -7910.57 + 4764.42 * corruptR-Square = 0.76

Corruption and GDP p/capita Regression


Linear Regression

2.00 4.00 6.00 8.00


20.00

30.00

40.00

50.00

60.00

70.00

How Equally is Income Distributed (100 = perfect inequality) = 47.89 + -1.70 * corruptR-Square = 0.12

Corruption and Gini Regression


Linear Regression

2.00 4.00 6.00 8.00


0.00

10.00

20.00

30.00

Percent GDP growth = 7.18 + -0.41 * corruptR-Square = 0.05

Corruption and GDP Growth Rate Regression

Regulation CorrelationsRegulation CorrelationsCorrelations

1 -.400** -.213* .340**

.000 .026 .000

109 109 109 106

-.400** 1 -.115 -.542**

.000 .142 .000

109 165 165 146

-.213* -.115 1 .119

.026 .142 .152

109 165 165 146

.340** -.542** .119 1

.000 .000 .152

106 146 146 146

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

How Equally is IncomeDistributed (100 =perfect inequality)

What is the GDP PerCapita ($ at PPP)

Percent GDP growth

How Easy is it to Start aBusiness



What isthe GDP


PercentGDP growth

How Easyis it to Starta Business

Correlation is significant at the 0.01 level (2-tailed).**.

Correlation is significant at the 0.05 level (2-tailed).*.

Pearson’s R resultsPearson’s R results

Gini Coefficient = .340 – moderate positive Gini Coefficient = .340 – moderate positive relationshiprelationship R square - .12R square - .12

GDP growth = .119 – Negligible relationshipGDP growth = .119 – Negligible relationship R square - .01R square - .01

GDP p/capita = -.542 – strong negative GDP p/capita = -.542 – strong negative relationshiprelationship R square – .29R square – .29


Linear Regression

0.00 50.00 100.00 150.00

How Easy is it to Start a Business

0.00

10.00

20.00

30.00

Percent GDP growth = 4.54 + 0.01 * regulationR-Square = 0.01



Linear Regression

0.00 50.00 100.00 150.00


20.00

30.00

40.00

50.00

60.00

70.00

How Equally is Income Distributed (100 = perfect inequality) = 33.91 + 0.08 * regulationR-Square = 0.12



Linear Regression

0.00 50.00 100.00 150.00


0.00

20000.00

40000.00

60000.00

What is the GDP Per Capita ($ at PPP) = 20545.35 + -116.31 * regulationR-Square = 0.29


Interpreting DataInterpreting Data

Same conclusion as corruptionSame conclusion as corruption Major factor in wealth creation but not a Major factor in wealth creation but not a

definitive factor in developmentdefinitive factor in development Moderate positive relationship with Gini, Moderate positive relationship with Gini,

that is significantthat is significant As countries level of corruption and As countries level of corruption and

business regulation decrease the level of business regulation decrease the level of wealth will increasewealth will increase

Final ConclusionsFinal Conclusions

No evidence that either regime type is No evidence that either regime type is better at promoting economic better at promoting economic developmentdevelopment

Regime type not relatively important as a Regime type not relatively important as a factorfactor

Democracies with low levels of corruption Democracies with low levels of corruption and business regulations will tend to be and business regulations will tend to be wealthywealthy

Documents

Regime Type and Economic Development By James Mazol