Democracy and Growth in the 21st Century

We find that, in the 21st century, democracy has persistent negative impacts on growth in GDP and night-time light intensity. This finding emerges from five different instrumental variable strategies that account for potential invalidity in some of the instruments. Our analysis also suggests a key mechanism: In this century, many electoral democracies shift toward populism and protectionism. These political changes weaken trade and investment, collectively dampening economic growth. Democracies also experienced lower growth in subjective life satisfaction among citizens. However, democracy causes slower growth in CO2 emissions and energy use, suggesting a trade-off between economic growth and socio-environmental performance.