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Institutions and Economic Performance-Last Act around the obvious Contemporary

Helpman closing his book with a selection of skillfully combining theory and empirical testing economic policy around the development. In this section, Helpman does not seem to give an absolute answer as to the relationship between democracy and economic growth since the last three chapters offer the reader with very different visions. It is not that call into question
the need for a democracy to begin the development of states, but without the right institutions and incentives, no long-term improvement is possible, no more so than in an autocratic regime. In addition, choosing the study of Persson and Tabellini as closing chapter, Helpman emphasizes the importance of assumptions of theoretical models and methods of selected estimates that largely determine the outcome of each study.

To understand better, let's look at Besley and Kudamatsu ("Making autocracy works" 2008)
we give a more mixed than usual autocratic systems. Indeed, by emphasizing the fact that the systemic functioning of an autocracy has always been neglected in the literature, the authors start from the observation that democracy does not always guarantee the growth and autocratic sometimes associated with better performance . China is often given as a recent example of economic success without pre-requisite of democracy, and going back in time reveals that the British Industrial Revolution began long before being put in place broad and democratic elections (It should be noted here that Besley and evaluate Kudamatsu democracy only through the nature of elections). By observing the stylized facts, it quickly revealed that the dictatorships have the particularity to go from one extreme to the other in terms of economic performance, that is to say that the growth rate will be much stronger than for democracies ("outperforming") are much lower. The authors are therefore of major interest to understand the mechanisms of autocratic decision. The article is based on the idea that performance depend on the degree of economic responsibility of the leader who, whatever the regime, has a dominant role in decision-making.

Indeed, if in a democracy, the electoral process that makes the leader accountable (for reelection), dictators rely for keeping them on a group of key people put in power. This group will derive the benefits of political leader as a citizen, will exert a greater or lesser pressure on the leader, in order for it to implement policies conducive to their own well-being depends on the interest General. It includes so why occasionally autocratic regime can bear fruit in terms of general interest, if the group holding the keys of power in hand trying to take advantage of the implemented policies, then economic growth may begin.
It is obvious that major requirement is the ability of the political group to threaten the autocratic leader, otherwise it would have all the cards to run without taking responsibility, leading the country to the lowest.

Let their example: China. The 20 officers of the Chinese Communist Party refers to the pressure group around the leader. Thus in 2002, Jiang Zemin, despite his attempt to convince members of the Party, Hu Jintao replaced because party members had felt that the widening inequality that occurred under Jiang would eventually undermine the overall economic success of China. A reason, therefore, the leader is replaced, in favor of an unprecedented economic growth for the country.

Jiang Zemin and his successor

A key element in the "success" of such schemes is the "turnover" of the leader, which favors the development of policies for development, precisely because the leader supports greater pressure pushing for more responsibility. It
e st clear that the purpose of Besley and Kudamatsu is not to praise autocratic regimes, quite the contrary. This is to highlight some institutional mechanisms prompting the head of the government to act to improve the country's economic situation. democracy, the authors argue, is not a sufficient condition for economic development without an effective incentive system. It is clear that dictatorships can lead a country to the worst situations and a state of emergency, unless the interests of politicians are meddling in the public interest.

Aghion, Alesina and Trebbi adopt a different argument to express the fragile relationship between democracy and economic growth. Indeed, starting from the same stylized facts, the authors are led to believe that the institutions of a democratic regime will impact the different economic sectors. It ends up in this dualistic view where the democratic process is a positive sum game in which sectors are winners and others losers, which depends according to the authors, the technological content of each sector. By developing a theoretical model to help them assess the impact of democratic institutions on the entry of new firms in a sector. Aghion, Alesina and Trebbi assume that firms already present in a market will have to provide more effort and jars of wine to prevent the entry of new competitors, the level of democracy rises. Thus, more democratic institutions encourage innovation of new firms and thus impacting most sectors with high technological content. Thus, the authors tested the relationship between democracy and growth, first without controlling the i- NTERACTION between institutions sectors innovations, while not finding any significant relationship. Once these interactions between democracy and technological level are integrated, they are not only a positive effect of institutions on innovative sectors, but also impact positively on overall economic growth.

The last chapter of the book is devoted to Helpman work of Persson and Tabellini who wanted to re-evaluate the relationship between democracy and development by adopting a different method of estimation. Indeed, by studying the relationship through a nonparametric estimation, the authors conclude that the impact of democracy on growth has often been underestimated. By relaxing this linearity assumption imposed on the relationship, Persson and Tabellini show that the impact of a change of political regime can be considerable. Thus, if a country loses its democratic institutions after the establishment of a dictatorship, it can know a recession of nearly 45%.

This study has the benefit of educating the reader about the importance of the assumptions underlying models that are exposed throughout the reading. Indeed, the work of both theoretical and the empirical relationship between institutions and economic performance are still subject to assumptions and estimation techniques that are their own and need not to forget them, since they may have serious results.