Analysis reveals the institutional quality is crucial for GDP per capita in 123 countries, suggesting a need for policy focus on institutions.
This paper investigates how democracy influences economic growth through innovation and institutional quality. Using an augmented Solow growth model and panel-data mediation analysis across 123 countries (2011–2022), we quantify democracy’s impact on GDP per capita. Our results show that institutional quality accounts for 83.3% of democracy’s total effect on economic output, while innovation explains only 16.7%. This study contributes to the literature by distinguishing between institutional and innovation channels in the democracy–growth nexus and provides policy-relevant insights for promoting inclusive economic growth (SDG 8) and building resilient infrastructure and innovation (SDG 9).
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Ben-Malka et al. (2025) studied this question.
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