European Journal of Business Science and Technology 2020, 6(1):21-36 | DOI: 10.11118/ejobsat.2020.003

The “Three-D-Relationship”: Do Democracy and Development Lead to Increased Debt?

Petr Blížkovský1,2, Luboš Střelec2, Kateřina Blížkovská3
1 European Committee of the Regions, Brussels, Belgium
2 Mendel University in Brno, Czech Republic
3 Humboldt University, Berlin, Germany

The paper aims to test the research hypothesis of whether more democratic and economically developed countries tend to have higher public debts (the “Three-D-Relationship”) or not. The hypothesis was tested on a panel of 91 countries over the period from 2012 to 2016 using a two way analysis of variance where debt was the dependent variable and regime type and income levels were factors. The results only partially confirmed the hypothesis. Higher democratic standards did correlate with higher debt levels. Similarly, higher income levels also correlated with bigger debt burden. Both “democracy” and “development” combined was not linked to higher debt levels.

Keywords: democracy, authoritarian regimes, economic development, public debt, GDP, public policy
JEL classification: H11, H60, H63, P51

Received: August 5, 2020; Accepted: August 10, 2020; Published: August 31, 2020  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Blížkovský, P., Střelec, L., & Blížkovská, K. (2020). The “Three-D-Relationship”: Do Democracy and Development Lead to Increased Debt? European Journal of Business Science and Technology, 6(1), 21-36. doi: 10.11118/ejobsat.2020.003
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. ALT, J. E. - LASSEN, D. D. (2006): Fiscal transparency, political parties, and debt in OECD countries. European Economic Review 50(6), pp. 1403-1439, DOI: 10.1016/j.euroecorev.2005.04.001. Go to original source...
    2. ARCHER, C. C. - BIGLAISER, G. - DEROUEN, K. Jr. (2007): Sovereign Bonds and the "Democratic Advantage": Does Regime Type Affect Credit Rating Agency Ratings in the Developing World? International Organization 61(2), pp. 341-365, DOI: 10.2307/4498148. Go to original source...
    3. BARRO, R. (1996): Democracy and growth. Journal of economic growth 1(1), pp. 1-27, DOI: 10.2307/40215879. Go to original source...
    4. BALKAN, E. M. - GREEN, K. (1990): On democracy and debt. Public Choice 67(3), pp. 201-211, DOI: 10.1007/BF00224681. Go to original source...
    5. BARTOLINI, D. - SANTOLINI, R. (2017): Political institutions behind good governance. Economic Systems 41(1), pp. 68-85, DOI: 10.1016/j.ecosys.2016.05.004. Go to original source...
    6. BEAULIEU, E. - COX, G. W. - SAIEGH, S. (2012): Sovereign Debt and Regime Type: Reconsidering the Democratic Advantage. International Organization 66(4), pp. 709-738, DOI: 10.2307/23279976. Go to original source...
    7. BOYSEN-HOGREFE, J. (2017): Risk assessment on euro area government bond markets - The role of governance. Journal of International Money and Finance 73(A), pp. 104-117, DOI: 10.1016/j.jimonfin.2017.01.005. Go to original source...
    8. BUCHANAN, J. M. (1990): The Domain of Constitutional Economics. Constitutional Political Economy 1(1), pp. 1-18, DOI: 10.1007/BF02393031. Go to original source...
    9. CHECHERITA, C. - ROTHER, P. (2010): The Impact of High and Growing Government Debt on Economic Growth. An Empirical Investigation for the Euro Area. ECB Working Paper. No. 1237. August 2010. In: E.A. Brugger and R.L. Frey (Eds.), Sektoralpolitik vs. Regionalpolitik, Rüegger, Diessenhofen (1985), pp. 75-100.
    10. DIJKSTRA, G. (2018): Aid and good governance: Examining aggregate unintended effects of aid. Evaluation and Program Planning 68, pp. 225-232, DOI: 10.1016/j.evalprogplan.2017.09.004. Go to original source...
    11. ÉGERT, B. (2012): Public Debt, Economic Growth and Nonlinear Effects: Myth or Reality? OECD Economic Department Working Paper. No. 993. 17 October 2012. Go to original source...
    12. FELD, L. P. - KIRCHGÄSSNER, G. (2000): Direct democracy, political culture, and the outcome of economic policy: a report on the Swiss experience. European Journal of Political Economy 16(2), pp. 287-306, DOI: 10.1016/S0176-2680(00)00003-3. Go to original source...
    13. FELD, L.P. - KIRCHGÄSSNER, G. (2001): Does direct democracy reduce public debt? Evidence from Swiss municipalities. Public Choice 109(3-4), pp. 347-370, DOI: 10.1023/A:1013077121942. Go to original source...
    14. FRIEDEN, J. A. (1991): Debt, Development, and Democracy: Modern Political Economy and Latin America, 1965-1985. Princeton University Press, ISBN-10: 0691078998, 280 p.
    15. JALLES, J. T. (2011): The impact of democracy and corruption on the debt-growth relationship in developing countries. Journal of economic development 36(4), pp. 41-72. Go to original source...
    16. KRUGMAN, P. (2011): Rule by Rentiers, N.Y. TIMES, June 9, 2011.
    17. KUMAR, S. M. - WOO, J. (2010): Public Debt and Growth. IMF Working Paper. 2010/174, July 2010. Go to original source...
    18. LAV, I. J. - McNICHOL, E. (2011): Misunderstandings Regarding State Debt, Pensions, and Retiree Health Costs Create Unnecessary Alarm. Centre on budget and policy priorities, January 20, 2011, 21p.
    19. LIPSET, S. M. (1959): Some Social Requisites of Democracy: Economic Development and Political Legitimacy. American Political Science Review 53(1), pp. 69-105, DOI: 10.2307/1951731. Go to original source...
    20. MACLEAN, N. (2017): Democracy in chains. Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America. Viking Publ., ISBN 1101980966.
    21. MADISON, J. (1865): Political Observations. In: Letters and Other Writings of James Madison, vol. 4.
    22. MILLER, E. F. (ed.) (1987): Political Discourses and My Own Life, (by David Hume). Indianapolis, IN: Liberty Fund, Inc. and Liberty Fund, Inc., 1742 p.
    23. NEUMAYER, E. (2002): Is good governance rewarded?: A cross-sectional analysis of debt forgiveness. World development 30(6), pp. 913-930, DOI: 10.1016/S0305-750X(02)00018-9. Go to original source...
    24. NORTH, D. C. - WEINGAST, B. R. (1989): Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England. Journal of economic history, 49(4), pp. 803-832, DOI: 10.2307/2122739. Go to original source...
    25. KIRCHGÄSSNER, G. - POMMEREHNE, W. W. (1993): Low-cost decisions as a challenge to public choice. Public Choice 77(1), pp. 107-115, DOI: 10.1007/BF01049224. Go to original source...
    26. PLATO (360): The Republic, Book 7. In: http://classics.mit.edu/Plato/republic.1.introduction.html
    27. POMMEREHNE, W. W. - SCHNEIDER, F. (1985): Politisch-ökonomische Überprüfung des Kaufkraftinzidenzkonzepts: Eine Analyse der AHV-Abstimmungen von 1972 und 1978. Public Choice 77, pp. 107-115.
    28. REINHART, C. M. - ROGOFF, K. S. (2010): Growth in a Time of Debt. NBER Working Paper. No. 15639. Go to original source...
    29. RINDERMANN, H. - KODILA-TEDIKA, O. - CHRISTAINSEN, G. (2015): Cognitive capital, good governance, and the wealth of nations. Intelligence 51, pp. 98-108, DOI: 10.1016/j.intell.2015.06.002. Go to original source...
    30. RITA YI MAN Li - TAT HO Leung (2015): Is Democracy a Pre-Condition in Economic Growth? A Perspective from the Rise of Modern China, UNChronicle.
    31. PUDDINGTON, A. - ROYLANCE, T. (2017): Populists and Autocrats: The Dual Threat to Global democracy. Freedom in the world. Freedom House.
    32. SCHRAGGER, R. (2012): Democracy and Debt. The Yale Law Journal 121(4), pp. 860-886.
    33. SZABÓ, Z. (2013): The Effect of Sovereign Debt on Economic Growth and Economic Development. Public Finance Quarterly 58(3), pp. 251-270.
    34. THE ECONOMIST INTELLIGENCE UNIT (2017): The Economist Intelligence Unit's Democracy Index 2016, Revenge of the "deplorables" A report by The Economist Intelligence Unit. http://www.eiu.com/Handlers/WhitepaperHandler.ashx?fi=Democracy-Index-2016.pdf&mode=wp&campaignid=DemocracyIndex2016.
    35. VARSHNEY, A. (1999): Democracy and poverty. Conference on World Development Report 2000, Organized by the U.K. Department for International Development and the Institute of Development Studies, Sussex, Caste Donnington, England, August 15-16, 1999.
    36. VED P. N. (2006): The "Good Governance" Concept Revisited. The Annals of the American Academy of Political and Social Science 603(1), pp. 269-283, DOI: 10.1177/0002716205282847. Go to original source...
    37. WORLD BANK (2017): http://data.worldbank.org/indicator/GC.DOD.TOTL.GD.ZS.
    38. WORLD BANK (2017a): http://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
    39. WUCHERPFENNIG, J. - DEUTSCH, F. (2009): Modernization and Democracy: Theories and Evidence Revisited Living Reviews in Democracy, Volume 1, pp. 1-9.

    This is an open access article distributed under the terms of the Creative Commons Attribution-ShareAlike 4.0 International License (CC BY-SA 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content