Democracy and Growth Reconsidered: Why Economic Performance of New Democracies is not Encouraging

There are two innovations as compared to the previous literature on democratization and growth. First, not only the level of democracy is taken into account, but also changes in this level in the 1970s-1990s as measured by the political rights indices of the Freedom House. Second, the distinction is made between the rule of law and democracy, the rule of law being defined as the ability to ensure order based on legal rules; it is measured by the rule of law, investors’ risk and corruption indices. It is found that democratization in countries with strong rule of law (liberal democracies) stimulates economic growth, whereas in countries with poor rule of law (illiberal democracies) democratization undermines growth. In illiberal democracies institutions are weaker, shadow economy is larger and macroeconomic policy is less prudent.Economic growth; democracy; rule of law

Democratization, Quality of Institutions and Economic Growth

There are two innovations in the paper as compared to the previous literature on democracy and growth. First, we consider not only the level of democracy, but also changes in this level in the 1970s-1990s as measured by increments of Freedom House political rights indices. Second, the distinction is made between democracy and law and order (order based on legal rules); the latter is measured by the rule of law, investors' risk and corruption indices. We discuss two interconnected threshold hypotheses: (1) in countries where law and order is strong enough, democratization stimulates economic growth, whereas in countries with poor law and order democratization undermines growth; (2) if democratization occurs under the conditions of poor law and order (so that illiberal democracy emerges), then shadow economy expands, quality of governance worsens, and macroeconomic policy becomes less prudent. We adduce a number of stylized facts to support our hypotheses. However our econometric findings are mixed: we report results that support the hypotheses as well as regressions that contradict them.Economic growth; democracy; rule of law

Stages of Development, Economic Policies and a New World Economic Order

This paper summarizes theoretical arguments, empirical evidence, and econometric findings to support the statement that rational economic policies depend qualitatively on stages of development that are defined by productivity and institutional indicators of a country. We consider the impact of industrial policies, speed of foreign exchange reserves accumulation, technology transfers and immigration policies, as well as FDI and liberalization of capital flows, on rate of economic growth. It is argued that the impact may be positive or negative; in many cases a threshold combination of GDP per capita and institutional quality indicators may be found to separate two different outcomes. A precondition of economic success is the timely switching of economic policies to avoid both types of mistakes: excessive inertia or premature use of instruments that are effective for more advance countries only. The stage of development theory implies that international financial institutions (including IMF, WB, and EBRD) should work out a list of differentiated prescriptions that may be efficiently followed by countries with different levels of institutional and technological development, and so the system of assistance to developing countries could be improved. This and some other elements of "a New World Economic Order" are discussed in the paper.Stages of development; economic growth

Resource Abundance, Political Corruption, and Instability of Democracy

In this paper we analyze data on sustainability of democratic regimes in resource rich countries and suggest a model to explain why resource abundance may lead to instability of democracy in some countries, but does not create any difficulties for a democratic system in other ones. Rate of resource rent tax is considered as the only policy instrument in our simple model. The tax affects the income of a representative voter. Choosing a tax rate, Autocrat competes with conventional Politician (a representative political party) for the office. Our model demonstrates the existence of a threshold for propensity to corruption (a measure of the institutional quality). The probability of the democracy preservation is decreasing in the amount of resources if the propensity is high and is independent of resources or even grows with the amount of resources if the propensity is low. It is shown also that Autocrat may use two types of policies depending on the qualities of governance (abilities to allocate tax revenues without big losses) that the public assigns to her and to Politician. More efficient Autocrat is inclined to follow populist high tax policy whereas lower Autocrat’s efficiency results in pro-Oligarch low tax policy when the country is resource abundant.Democracy; resource abundance; corruption

Instability of Democracy as Resource Curse

We suggest a dynamic game theoretic model to explain why resource abundance may lead to instability of democracy. Stationary Markov perfect equilibria of this game with four players – Politician, Oligarch, Autocrat and Public (voters) – are analyzed. Choosing a rate of resource rent tax, potential Autocrat competes with conventional Politician for the office, and Oligarch, the owner of the resource wealth, bribes Politician to influence her decisions. Actual Autocrat's tax policy may be different from the announced one. If the difference is large, then Public may revolt or Oligarch may organize a coup to throw Autocrat down. It is shown that the probability of democracy preservation is decreasing in the amount of resources if the institutional quality is low enough. It does not depend on the amount of resources, if the institutional quality is higher than a threshold. The level of the threshold, however, depends positively on the resource wealth. We have found also that under very low institutional quality, a paradoxical effect takes place: the probability of democracy preservation may decrease with small improvements of institutional quality. It is shown as well that Oligarch earns larger part of rent under democracy than under autocracy. This result conforms to empirical observation which is demonstrated in the paper: under low quality of institutions, democratization leads to higher inequality and inequality entails worsening of the attitude to democracy.resource abundance; resource curse; democracy; autocracy; elections; political stability

Resource abundance: A curse or blessing?

Is resource abundance a blessing or a curse? Typically, in resource rich countries, domestic fuel prices are lower, and energy intensity of GDP is higher. But they have higher investment in R&D and fixed capital stock, larger foreign exchange reserves and more inflows of FDI. They also have lower budget deficits and lower inflation. These are conducive for long term growth. We also find that in resource rich countries, real exchange rate is generally higher, accumulation of human capital is slower and institutions are worse, especially if they were not strong initially, which are detrimental for growth.Resource curse, economic growth, inequality, institutions, real exchange rate, budget deficit, inflation, investment, industrial policy

Mechanisms of Resource Curse, Economic Policy and Growth

This paper analyzes economic policies in resource rich countries and various mechanisms of resource curse leading to a potentially inefficient use of resources. Arguments are provided in favor of "conditional resource curse" hypothesis: resource abundance hampers growth if institutions of a country are weak. We study the impact of the resource abundance on budget deficit and inflation, foreign exchange reserves and real exchange rate, as well as policies of maintaining low domestic fuel and energy prices. We show that lower domestic fuel prices, that are typical for resource rich countries, have a positive effect on investment in R&D and fixed capital stock, and on long term growth, even though they are associated with losses resulting from higher energy intensity. However, in resource rich countries real exchange rate is generally higher than in other countries. Besides, resource abundance leads to corruption of institutions, especially if these institutions were not strong in the beginning of the period. While there is no solid evidence that, on average, resource abundant countries grow more slowly than the others, there is evidence that they use resources less efficiently, if their institutions are weak.resource curse; economic growth; quality of institutions; inflation; industrial policy; lower domestic fuel prices; real exchange rate

Minimal invasive decompression for lumbar spinal stenosis.

Lumbar spinal stenosis is a common condition in elderly patients and may lead to progressive back and leg pain, muscular weakness, sensory disturbance, and/or problems with ambulation. Multiple studies suggest that surgical decompression is an effective therapy for patients with symptomatic lumbar stenosis. Although traditional lumbar decompression is a time-honored procedure, minimally invasive procedures are now available which can achieve the goals of decompression with less bleeding, smaller incisions, and quicker patient recovery. This paper will review the technique of performing ipsilateral and bilateral decompressions using a tubular retractor system and microscope

An Evolutionary Theory of Economic Policy: Part I: The Experience of Fast Development

This article presents the first part of the work on how instruments and methods of the growth promotion should change as a country approaches the level of advanced economies in terms of welfare and the quality of institutions. We describe the evolution of economic policies in Western countries and also in countries that became known as "economic miracles" during their catch up development. Our analysis allows to trace the major directions of such evolution: from import substitution to export orientation, from regulation of import tariffs to non-selective policy of the real exchange rate undervaluation, from import of technology to domestically based research and development, from creation of large companies to support of small and medium-size firms.economic growth; institutions; "economic miracles"