Democracy and national economic performance: The preference for stability

Democracies differ from autocracies in that democracies produce stable, not high or low, growth in national income. We analyze the likely risk/return preferences of voters and hypothesize that the underlying causal mechanism generating democratic stability is that democracies more accurately reflect the risk aversion of ordinary citizens. We test our hypothesis in several ways. First, we reexamine three studies of comparative economic voting and find that voters penalize incumbents when economic volatility increases, Second, we use extreme bounds regression analyses to show that democracies? compared to autocracies, are characterized by less volatility in economic growth rates. Third, we find Chat democratic stability does not appear to arise because democracies ameliorate the effects of social cleavages, another mechanism that might explain democratic stability. When growth and volatility are jointly examined, democracies reveal highly favorable economic results.