Is there any evidence that democracy is linked causatively with improved outcomes? [duplicate]

Question

Is there any evidence that democracy is causatively linked with improved outcomes such as happiness and wealth?

And is there any data on the nature of the link? For example: do greater levels of democracy deliver greater levels of these benefits?

Answer 1

At least in recent times, democracy did boost economic growth, according to a 2017 study:

Empirical results based on a panel data of 144 countries observed for 1980–2014 show that democracy had a robust positive impact on economic growth. Credit guarantee is one of the most significant positive links between economic growth and democracy. The marginal effects of credit guarantee and foreign direct investment inflows are stronger in democratic countries than they are in non-democratic ones. In order to check the robustness of these results, a dynamic model constructed with a flexible adjustment speed and a target level of GDP is also tested. The results of this dynamic model also support the positive impacts of democracy on economic growth.

Apparently investors are more willing to invest in democracies. Of course, there's only one China, so they'll invest there too. But if you're a small country...

And even considering the more mixed results of older studies, some positive effects were derived (in 2008 meta-analysis):

Despite a sizeable theoretical and empirical literature, no firm conclusions have been drawn regarding the impact of political democracy on economic growth. This article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy-growth literature. It applies meta-regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth. Using traditional meta-analysis estimators, the bootstrap, and Fixed and Random Effects meta-regression models, it derives several robust conclusions. Taking all the available published evidence together, it concludes that democracy does not have a direct impact on economic growth. However, democracy has robust, significant, and positive indirect effects through higher human capital, lower inflation, lower political instability, and higher levels of economic freedom. Democracies may also be associated with larger governments and less free international trade. There also appear to be country- and region-specific democracy-growth effects. Overall, democracy’s net effect on the economy does not seem to be detrimental.

And as you probably expect (in this last paper):

Real-world factors appear to be important. The coefficient on Latin America is positive and statistically significant. That is, partial correlations from studies that include Latin American countries in their samples are larger than those that use OECD without Latin American observations (OECD is the base region). In addition, studies report lower democracy-growth effects when Asian countries are included in their datasets.

These conclusions are not universally accepted though. There's 2016 IADB paper which disagrees in the following sense: if you exclude all former-Socialist countries (because their economic data before 1990 cannot be trusted) and if you also exclude all countries in which transition to democracy happened (according to experts) primarily due to the poor economic situation (e.g. Benin and many of the other African transitions, or Latin America due to the 1980s debt crisis), then what's left is a sample where the transition to democracy happened "exogenously" (e.g. Spain after the death of Franco) and in these exogenously democratized countries no improvement in GDP growth due to a democratic transition is observed. However, even for these exogenously democratized countries they found some non-economic benefits, e.g. an improvement in "Physical integrity rights index (measured by the degree of torture, extrajudicial killing, political imprisonment, and disappearance indicators)" and "Empowerment rights index (measured by indices regarding freedom of speech, freedom of assembly and association, workers' rights, electoral self-determination, freedom of religion, and citizens' freedom to leave and return to their country as well as to travel within their own country)".

I should also mention that this IADB paper seems largely intended to debuk a paper of Acemoglu et al. (draft in 2014, peer-reviewed published in 2019) which not making this separation of democratization events in endo- and exogenous ones just concluded that democratization events increased the GDP growth rate for the time frame 1960-2010.

Another interesting nuance paper (2015), using data that goes back to 1820, basically finds that

prior to 1960, democratizations were not confounded by the influx of [foreign] aid and were not associated with accelerated rates of economic growth.

To reach this conclusion this paper excluded (controlled for) Marshall Plan recipients (which was pre-1960).

Answer 2

China and Singapore are two fairly notorious examples of nations that developed without a democratic system. South Korea is another oft-cited example -- the latter gradually became more democratic since the late 1980s. Taiwan is yet another example of a country that wasn't particularly democratic until the early 1990s, yet did rather well.

While Singapore, South Korea, and Taiwan might be small enough to dismiss as flukes in the data, China is large enough that it should give pause to any commentator who, like those who prognosticated the end of History after the fall of the USSR, thought that a democratic system and economic well-being were two sides of the same coin. In the minds of thinkers at the time, there was a notion that by promoting economic development in China, democratic institutions would follow. It has not been the case, and in our age of mass surveillance there's little reason to think it'll be the case in the near future.

At the other end of the spectrum, there's a laundry list of countries with less stable institutions than the West been enjoying since WW2, which show that the democratic nature of a regime doesn't correlate much with economic well-being. And even in the West there actually are no patterns either -- see e.g. France under Napoleon III or the Spanish Miracle under Franco.

Whether citizens in non-democratic wealthy countries are more or less happy than citizens in democratic wealthy countries is subjective, but I would raise a quote from this document by the World Happiness Report which echoes the above. Discussing whether quality of government services delivered is more or less important than the government being democratic, its authors write (emphasis mine):

Previous studies comparing these two indexes as predictors of life evaluations have found that quality of delivery is more important than the democracy variable, both in studies across countries and in ones that include country-fixed effects.

Answer 3

First part of the question -

"Is there any evidence that democracy is causatively linked with improved outcomes such as happiness and wealth?"

There is evidence that democracy is linked with improved outcomes, this evidence does not support necessary causation. At best, one would say that democracy is one of many factors that contribute to improved outcomes.

Reasoning:
For the sake of this discussion set aside the many issues with the following items:

• "improved outcomes" are the same thing as "happiness and wealth".
• we really could come up with some kind of metric for happiness and/or wealth that could be agreed upon.
• we could agree on what we mean by "democracy" (There are three basic forms of democracy and many variants)

This answer:

1. Focuses on the terms in the question "evidence" and "causatively".
2. Uses "improved outcomes" as a single term for either wealth or happiness.
3. Argues that democracy is not a necessary cause of improved outcomes.

One might point to a list of wealthy democratic countries or a list of the happiest countries as evidence that democracy is causatively linked with improved outcomes. This is the questionable cause logical fallacy.
Having evidence that democracy is linked with improved outcomes provides a correlation but correlation does not prove, or imply causation.

The fact that China, Singapore, and South Korea (as Denis points out in his answer) have experienced rapid economic transformation without being particularly democratic and the existence of democratic countries with persistent high poverty levels such as India, Jamaica, Philippines and others demonstrates that democracy is not a necessary cause for improved outcomes. At best, democracy is a sufficient or contributory cause for improved outcomes.

Second part of the question

"Is there any data on the nature of the link? For example: do greater levels of democracy deliver greater levels of these benefits?"

The question requires that we be able to rank levels of democracy and correlate them to improved outcomes - wealth and happiness. Here are some conclusions based on data to illustrate the issues with attempting to draw links between democracy and improved outcomes.

Ranking Democracies
The Economist has ranked democracies based on:

1. Electoral process and pluralism
2. Civil liberties
3. The functioning of government
4. Political participation
5. Political culture

Based on this here are the top five most democratic:

1. Norway
2. Iceland
3. Sweden
4. New Zealand
5. Denmark

Wealth Levels
Richest countries in the world - should this be measured by GDP or GDP per captia? For simplicity I'll show GDP only.

1. China
2. United States
3. India
4. Japan
5. Germany

Happiness Ranking
World Happiness Ranking 2015-2017 Here is a graph of this data.

1. Finland
2. Norway
3. Denmark
4. Iceland
5. Switzerland

U.S. News has it's own ranking of "Best Countries"

What can one say more democracy causes based on these rankings? Democracy causes happiness but not wealth. Or, one might say any number of other things, like:

• Nordic countries are more democratic and happy.
• Northern Europeans tend to be the most democratic and happy.
• Parliamentarian democracies have improved outcomes
• [insert your correlation here] are the most democratic and happy.

Conclusion
There is evidence that democracy is linked with improved outcomes, but this evidence does not support necessary causation.
The factors that drive "improved conditions" are more complicated than a democracy ranking.

This complexity requires us to ask better questions so that we can get actionable answers.
Suggested questions, Not a complete list.

• What do we mean when we talk about happiness? Getting into the details on this question will uncover that there are many ways of thinking about happiness and we need to be more specific about the problem we are trying to solve to arrive at clarity
• What are the characteristics that contribute to (the types of) happiness?
• What role does government play in contributing to happiness?