DEMOCRACY AND DEVELOPMENT - A THEORETICAL FRAMEWORK

A simple framework is set up to discuss the relationship between democracy, material welfare, and development. Democracy is regarded both as a good in its own right, and as an input in the production of material welfare. The optimum level of democracy is then related to the level of development. At the optimum point, the marginal cost of democracy in terms of foregone output is positive, and growth is a decreasing function of the level of democracy. Deviations from the optimum path are described as either repressive or populist. Democratization is not unambiguously an optimal response to exogenous shocks.