Democracy, Dictatorship, and the Variance of Growth
Last night I was writing my lecture notes on dictatorship, and realized that I didn’t have a source for a factoid I often tell my students. Namely: Democracies and dictatorships have the same average growth rate, but dictatorships have higher variance. The intuition: If you get a smart growth-oriented dictator, he follows the Nike strategy: “Just do it.” If you get a sociopathic dictator, he burns his country down. In democracies, in contrast, mediocrity and compromise reign.
But what’s the source? It took me about fifteen minutes to track down a seemingly seminal 1991 paper by Sah in the JEP. When I actually looked at it, however, there were no supporting empirics. This left me wondering if my factoid was even true. Yet eventually I found a good citation (Almeida and Ferreira, Economics and Politics 2002). The variance of growth is 4.5 times larger in dictatorships than democracies. There’s even a pretty graph: