Learning about Growth and Democracy

Abstract

We develop and estimate a model of learning that explains the observed correlation between income and democracy as well as the clustering of democratization events. In our model, countries' own and neighbors' past experiences shape elites' beliefs about the effects of democracy on economic growth and their likelihood of retaining power. These beliefs influence the choice to transition into or out of democracy. We show that learning from past experiences is crucial to explaining observed transitions since the mid-twentieth century. Moreover, our model predicts reversals to authoritarianism if the world experienced a growth shock the size of the Great Depression.