Three Essays on Democracy and Economic Development

Abstract

This project examines two related questions: how political regimes shape economic policies and, in turn, how and to what extent economic conditions consolidate or destabilize the democratic form of governance. The collection of three essays in this dissertation presents a new theory on democratic disadvantage in economic policy implementation and proposes two quantitative methods to reevaluate the effect of economic development on democratization. The first essay identifies the disadvantages of democratic governance in banking regulation and finds evidence that democratic countries are less likely to implement macroprudential banking policies. The second essay finds the temporal heterogeneity of the effect of income on democratization, using Bayesian time-dependent Probit models. The result shows the positive effect of income on democracy has gradually decreased since the beginning of the twenty century, and the effect no longer holds after the end of the Cold War. Lastly, the third essay proposes a method using quantile regression and the skewed t-distribution to examine the asymmetric effect of economic factors on the level of democracy. I reveal that while rising income inequality moderately increases the risk of democratic regression, it significantly decreases the probability of increasing the level of democracy.