I would never have believed it.

But, in a just-completed working paper with my long-time coauthor and pal, Kevin Grier, we find some pretty interesting things:

1. Democracies grow faster. (Yeah, you might think so, but this result is controversial)

2. New dictatorships grow very slowly, and very old dictatorships grow very slowly. But durable dictatorships in the middle years actually grow nearly as fast as democracies. A nonlinear specification fits almost exactly.

3. And this is consistent with a clear prediction from Mancur Olson. Interesting that he got it so right:
A rational autocrat with a long time horizon will not confiscate his subjects’ assets, because this will reduce investment and future income and, thus, his own long-run tax receipts.
Now, suppose the autocratic ruler is uncertain about whether he will be in charge much longer. He may be uncertain about this because he fears invasion from a yet-more-powerful domain, a coup d’etat, a revolution, or an assassination. When uncertainty gives him a short-term view, he has an incentive, no matter how gigantic his empire or how exalted his lineage might be, to seize any asset whose total value exceeds the discounted present value of its tax yield over his short-term horizon. With a sufficiently short planning horizon, it pays any autocrat not only to confiscate all readily seizable assets but also to repudiate his debts and to generate inflation by printing money for his own use, no matter how great the long-run cost….
Any autocracy must sooner or later have a short time horizon. In addition to the external and internal enemies and accidents that can end any autocracy, there is the fundamental problem of succession. If an autocrat were to create a body with the power to guarantee an orderly succession, that body would have to have more power than anyone else in the society. But it could only have this power if it had more power than the autocrat—and thus the capacity to overrule the autocrat—in which case the society by definition would not be an autocracy. (pp. 47-8, Olson, Mancur. (1997). The New Institutional Economics: The Collective Choice Approach to Economic Development. In C. Clague (ed), Institutions and Economic Development: Growth and Governance in Less-Developed and Post-Socialist Countries.)

If you want to see the paper, it is here... We would love to have comments.

KB Grier
MC Munger