The debate on the effect of democracy on economic development or growth has been comprehensively growing since the 1980s in theoretical and empirical literature. The key Questions have been: ‘’Does democracy promote economic development/ growth? What is the effect of regime type on economic growth, infrastructure, human capital, social equality and the overall quality of life in developing countries? The main purpose of this study is to analyze the effect of democracy on economic development in developing countries.Yet the scholarly evidence for these propositions is thin. Political scientists, economists and sociologists generally view the effect of regime type on development as inconsistent, at best. It is not clear whether democracies introduce better policies and policy results than autocracies. Some argue, with an eye towards the East Asian Newly Industrializing Countries (NICs), that economic growth is most likely to be achieved through a period of strict authoritarian rule, deemed necessary to instill discipline in the labor force, to prioritize long-term savings and investment over current consumption, and to resist the rent seeking pressures of organized groups.Democracy is often associated with policy sclerosis and with skewed political representation, a situation in which relatively educated and well- organized voters are able to monopolize state resources and prevent measures to redistribute resources to the rural poor. Democracy may also be seen to encourage clientelism, rent seeking style of politicking in which side payment to special interests trump the provision of collective goods. Democracy may likewise open the floodgates to ethnic conflict and social disorder. In short, there are many reasons and a considerable amount of anecdotal evidence to suggest that democracy does not stimulate positive development outcomes. Evidence for the above judgments is drawn from case studies, and results found to be either neutral or inconsistent. Scholars are somewhat more optimistic about the causal effects of democracy on social development, yet there is a great ambiguity. Democracies do spend more on social policies, but it is not clear that there is a robust association between spending levels and policy achievements in developing world. The social policy bucket is accused to be very leaky.Of course, democracy might still be defended for other reasons as seen from the case studies and related literature. For instance, it is argued that democracy enhances citizen participation, civil liberties and civil society. We find that rapid growth in the high performing economies appears to have little effect on democratization. Against the widely held view that growth enhances democratization, the evidence in this study suggests that rapidly developing countries under authoritarian rule are unlikely to improve their democratic institutions.Hence, the relationship between democracy and development is one of the widely disputed issues in the study. However, the real problem is the direction of the relationship. There has been no consensus on this. The results of the assumptions put forth that while economic democracy affects growth positively in developing countries, there is not any significant relations between growth and political democracy. It can therefore, be concluded that political democracy affects growth in developing countries indirectly through its effects on economic development
