Democracy and Socio-Economic Development in Argentina

Abstract: The goal of this paper is to examine the relationship between democracy and socio-economic development in Argentina. Argentina was chosen due to its dynamic political history, and because economically it is a unique country, having faced strong economic decline last century. The literature on democracy shows that the level of democracy should not matter for economic development, whereas the durability of democracy, the amount of years a country has been a democracy, does matter. For human capital development, both factors should have a significant effect. To test these hypotheses, a time series analysis on Argentina for the time period 1951-2018 was performed, with as the main dependent variables Argentina’s growth rates of GDP, a human capital index representing education, and life expectancy, compared to the average growth rates of Argentina’s neighbouring countries. After performing VAR’s with a one year time lag, the results showed that neither the level nor the durability of democracy significantly affect compared GDP performance. The level of democracy has a negative impact on the human capital index growth rate, whereas durability of democracy has a positive effect on the compared life expectancy growth rate. Granger causality tests confirm the causal relationships. The complexity of the relationship between political institutions, economic development and human capital will be discussed afterwards. This study therefore helps to provide some insight in the causes of the “Argentinian puzzle”.