Democracy and economic growth: A causal analysis

Since Lipset's seminal study, some scholars have believed that economic development leads to democratization. Theoretically, however, more democratized political systems can also stimulate economic growth and development. Thus, democracy may lead to economic growth, while economic development may also lead to democratization. A Granger causal analysis is used to investigate the causal direction between the two variables; the analysis draws on data for thirty-two developing countries for the period from 1948 to 1982. The results of the analysis reveal that the causal direction between democracy and economic development can not be generalized in either way.