The Political Economy of Growth: A Critical Survey of the Recent Literature

This article reviews the recent literature on the political economy of growth, focusing on the research that has developed at the intersection of the endogenous growth litera-ture and the new political economy. It explores the relationships amcng four key variables: economic growth and capital accumulation, political instabidity, political freedom and democratic institutions, and income inequality. Two of the most active fields in economics in the past few years have been growth theory and political economy. Empirical and policy questions motivate both lines of research. The growth literature, with its new endogenous growth theories, analyzes economic factors such as education, openness, infrastructure, and government spending to determine which are more important or less impor-tant for growth. The political-economy literature argues that economics alone cannot fully explain the enormous variance across countries in growth and, more generally, in economic outcomes and policy choices. Political-economy models begin with the assertion that economic policy choices are not made by social planners, who live only in academic papers. Rather, economnic policy is the