We explore the question of how political institutions and particularly democracy affect economic growth. Although empirical evidence of a positive effect of democracy on economic performance in the aggregate is weak, we provide evidence that democracy influences productivity growth in different...

Analysis of a panel data set for 1976-98 shows that on balance stock markets and banks positively influence economic growth; findings that do not result from biases induced by simultaneity, omitted variables, or unobserved country-specific effects