Democracy and Prosperity in Two Decades of Transition
This paper revisits the relationship between democracy, liberalization, and prosperity in transition countries, using a panel of 25 countries over 20 years. Earlier investigations found political and economic liberalization to be positively correlated although the relationship between political liberalization and prosperity remained unclear. In this paper, the results are ambiguous regarding the relationship between democracy indicators by Freedom House and the Polity Project on the one hand and growth on the other. This contribution therefore investigates the component variables of these indicators in order to determine their degree of influence. The findings suggest that basic constitutional rights and constraints to the government rather than political competition as such may be conducive to both economic liberalization and prosperity in the transition countries.