How does democracy cause growth? Evidence from firms during Indonesia's democratic transition

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 24 November 2020


Online via Zoom


Priya Mukherjee, University of Wisconsin-Madison

While recent work suggests democracy does cause growth, the channels through which this effect occurs remain unclear. Exploiting quasi-random variation in the timing of district-level political regime changes induced by the collapse of President Soeharto’s government, we study the micro-level drivers of the democracy-growth relationship. Using Indonesian firm-level data, we find that democratization leads to an increase in firm productivity, a critical determinant of economic growth. Further, we find evidence of an improvement in the quality of local business regulations and the business environment for firms.

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