When Is Democracy Better for Economic Performance and when Is It Not: the Interaction Between Polity and Structural Factors

Is democracy or autocracy better for economic performance? Why do autocracies exhibit a greater variation in growth rate than democracies? We argue that democracy??s effects on growth are conditional on structural factors. Democracy is superior to autocracy only when structural factors, such as external threats or natural resource intensity, are not favorable to growth. Conversely, where structural factors are conducive to growth, autocracies are likely to perform better or equally well as democracies. By incorporating institutional and structural incentives into the equation, we answer the questions regarding the relative strengths and weaknesses of political regimes in pursing economic development. The empirical evidence examining postwar data significantly supports the hypotheses.