One road to riches? How state building and democratization affect economic development
Haakon Gjerløw, Carl Henrik Knutsen, Tore Wig and Matthew Charles Wilson
Forthcoming: Cambridge Elements
V-Dem Working Paper 2018:72
Building effective state institutions before introducing democracy is widely presumed to improve different development outcomes. We discuss the assumptions that this prominent `stateness-first' argument rests upon and how extant studies fail to correctly specify the counter-factual conditions required to test the argument. In extension, we subject the argument to three sets of tests focused on economic development as the outcome, leveraging new measures of democracy and state institutional features for almost 180 polities with time series extending back to 1789. First, we run standard panel regressions with interactions between state capacity and democracy. Second, we employ coarsened exact matching, specifying and testing different relevant counter-factuals embedded in the stateness-first argument. Finally, we employ sequencing methods to identify historically common sequences of institutional change, and use these sequences as growth predictors. We do not find any evidence supporting the stateness-first argument in either of these tests.