Relationship Between Democracy and Development: Evidence From Bangladesh

This paper examines the effect of democracy on the development outcomes of Bangladesh for the period 1972 to 2016. It analyzes both the long-run relation and the direction of causality using the Vector Error Correction Model (VECM) framework. The paper uses the Polity data constructed by the Polity IV project as the proxy for democracy, and GDP per capita (constant 2010 US$) as the proxy for development. The estimation based on VEC Model suggests the coefficients of co-integration equations do not adjust towards either long-run or short-run equilibrium, meaning that the results find no evidence of any relationship between democracy and economic development in Bangladesh. The results clearly indicate that though the cointegrating coefficient on the one-period lagged error correction terms is statistically significant, the positive sign implies that due to any disturbance in the system, divergence from equilibrium will take place and the system will be unstable

Author: Zakaria, Sultan Mohammed
Type: Working Paper
Year: 2016