Democracy and State Capacity: Complements or Substitutes?

Abstract

When it comes to social welfare, we do not have clear understanding of whether it is more important to have democracy or a capable state. Specifically, most studies do not consider the possibility that effects of democracy are conditioned or obscured by differences in the capabilities of states to deliver services effectively. This article contends that better developmental outcomes can result from either democracy or state capacity, but the combination of high levels of both democracy and state capacity is not synergistic. Empirical evidence from a time-series-cross-sectional dataset covering up to 162 countries during the 1965–2010 time period supports the conclusion that these factors partially substitute for each other with respect to improving outcomes in school enrollment and infant mortality. These findings provide a more optimistic answer to the query of Ross (Am J Polit Sci 50(4): 860–874, 2006) as to whether democracy is good for the poor. Once accounting for state capacity, we find that democracy leads to better development outcomes.

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Notes

  1. 1.

    Thanks to a reviewer for help with framing this research.

  2. 2.

    For examples, see Kaufman and Segura-Ubiergo (2001), Brown and Hunter (2004), Avelino et al. (2005), and Stasavage (2005).

  3. 3.

    The exceptions are Frey and Al-Roumi (1999), who use government spending as a percentage of GDP as a proxy for state strength, and Khaleghian (2003), who uses the International Country Risk Guide indicator of bureaucratic quality.

  4. 4.

    With a larger sample obtained in part through data imputation, Ross finds that democracy has little effect on child mortality.

  5. 5.

    For example, public health professionals seek to improve public health outcomes due to training or professional norms.

  6. 6.

    Since the gross rate of secondary school enrollment is based upon the number of students enrolled in secondary school compared to the school-age population, it can exceed 100 %.

  7. 7.

    This makes it difficult to apply the Monte Carlo approach that involves using samples from the posterior distribution of the estimated democracy scores.

  8. 8.

    Using the procedures described in Bockstette et al. (2002), the value of StateHist was calculated for 14 additional countries.

  9. 9.

    The values are weighted such that more recent time periods count more heavily than more distant periods. I use their statehist05v3 index.

  10. 10.

    Augmented Dickey Fuller tests indicate the presence of a unit root in the case of InfMort. Although this is not the case for EnrollSec, tests using both ECM and non-ECM functional forms show little difference in the substantive results. The former approach is used for consistency.

  11. 11.

    In about half the cases, the value of Democracy does not change at all. When it does change, the magnitude of change is typically small. In only 4 % of cases does it change by more than .4. Alternative tests using the first differenced Democracy variable in addition to the lagged level produced no substantive difference in the results. DemocracyBMR is unchanged in about 75 % of cases, and StateHist is fixed by construction.

  12. 12.

    In robustness checks, I employed the fixed-effects vector decomposition (FEVD) introduced by Plümper and Troeger (2007), and updated in 2010, which implements a three-stage procedure to estimate fixed effects but de-compose them into portions explained and not-explained by the observed time-invariant country characteristics. This technique is the subject of significant discussion in the Spring 2011 edition of Political Analysis, volume 19:2. I use version 4.0 of the xtfevd estimation routine, which corrects earlier problems in the calculation of standard errors.

  13. 13.

    He was elected president once again in 1996.

  14. 14.

    The rate of decline of infant mortality slowed slightly, but did not reverse.

  15. 15.

    The next highest is Algeria, followed by Jordan, Tunisia, and Egypt.

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Correspondence to Jonathan K. Hanson.

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Hanson, J.K. Democracy and State Capacity: Complements or Substitutes?. St Comp Int Dev 50, 304–330 (2015). https://doi.org/10.1007/s12116-014-9173-z

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Keywords

  • Democracy
  • State capacity
  • Public services
  • Development