Growth and Political Change: Transition Duration is Critical

Freund fig1 21 jan

Caroline Freund and Mélise Jaud in Vox:

The Arab world is undergoing a major political transition. The final outcomes of the changes are far from certain in nations where they have occurred. The geographical spread of the changes is also far from clear at this point. Nevertheless, there have been and will continue to be economic consequences from the moves towards democracy (see Besley and Kudamatsu 2007).

In recent research (Freund and Jaud 2013), we have looked at historical experiences to get an idea of likely outcomes. Specifically, to get a sense of what to expect, we identified and examined 90 attempts at transition from autocracy to democracy that took place over the last half century. Our results offer a cautiously optimistic tale for the Arab countries: most transitions are successful politically and/or economically.

In particular, we find that about 45% succeeded, 40% failed, and 15% achieved democracy gradually. Success is defined as achieving a high level of democracy within three years and maintaining it; failure is when democracy is achieved temporarily or only at very low levels; and gradual is sustained and significant democratic change that takes 4-15 years to complete.

Importantly, we find that the majority of countries that underwent a transition experienced long-run gains in income growth following short-run declines (see Figure 1). Typically, countries face temporary challenges around the time of change with growth declining by 7-11 percentage points in the year of transition, though in the case of gradual transition declines were much larger around 21 percentage poiints and lasted longer.