How parliamentarism passes the Pritchett test
In the book, I talk about the "Pritchett test for development" and how, according to Paul Romer, urbanization passes the test. I also claim, briefly, that the reader will note that parliamentarism also passes the Pritchett test. That is a strong claim to go without elaboration, but I thought, when writing, that going into this issue would repeat too many arguments already made. Luckily, in a blog post I can address it directly.
First, let me explain what the Pritchett test is - or, even better, let Paul Romer explain it (Romer is in block quotes, Pritchett in block quotes and italics):
He [Pritchett] recalls his experience as a member of a team with members from many developed countries that was evaluating a program in India that financed women’s self-help groups. A woman from West Bengal who had answered their questions said to the team, “You all are from countries that are much richer and doing much better than our country so your country’s women’s self-help groups must also be much better, tell us how women’s self-help groups work in your country.” Quoting now from Lant’s account:
We all looked at each other blankly as none of us had any idea whether there even were at any time in our countries’ history such a thing as “women’s self-help groups” … (much less government program for promoting them). We also had no idea how to explain that, yes, all of our countries are now developed but no, all of our countries did this without a major role from women’s self-help groups at any time (or if there were a role we development experts were collectively ignorant of it), but yes, women’s self-help groups promote development.
Pritchett proposes a basic, four part test that economists could consider when someone claims that governments or donors should experiment with policies designed to promote variable X because more X is good for development:
In a cross-sectional comparison of levels, do countries that are more developed have more X?
In cross-sectional comparison of growth rates, do countries that have rapid growth in X also tend to experience a rapid increase in standards of living?
When we look at the few countries for which we have long historical records, do the ones that become much more developed also acquire much more X?
If we look for countries that switch from a regime of slow economic development to a regime of rapid development, do we see a parallel shift in the rate of growth of change in X?
The answer to 1 is a resounding "yes". Pritchett is not asking whether countries that have more X are more developed in a cross-sectional comparison after controlling for other variables. The point of his test is to check the claim against common sense. So while it is true that countries that are more parliamentary are more developed after controlling for other variables, it is also true that they are much better without controlling for anything else. I assume the reason Pritchett proposed a simple cross-sectional comparison is to conduct a sanity check of his own. If X is not associated with more development, even before we control for anything else, than it is very hard to make the case that it really is associated with development. In the case of parliamentarism, however, it is also good to make a cross-sectional comparison with no controls because it establishes an upper bound on what the possible effect of parliamentarism can be. If this difference is very small, even if we have plenty of statistically significant results, then the proposed policy cannot be that important for development. Readers of the book will know that the difference will not be small, but they may still be surprised by how large it is. Parliamentary countries have, on average, an income per capita of USD24 thousand, while presidential countries have an average income per capita of USD5 thousand. The difference is USD19 thousand, or 380%.
The answer to 2 is also a yes. While this is not subject to such a simple test like the comparison of averages above, we may resort to McManus and Ozkan paper and recall that parliamentary countries grow, on average, 0.6 to 1.2 percentage points faster than presidential ones. Unfortunately, we do not have a continuous measure of parliamentarization or presidentialization.
The answer to 3 is also yes. I discuss in the book that the countries for which we have long historical records an became much more developed (basically European countries like Sweden and the United Kingdom) also "acquire much more X", in which X is being parliamentary.
The answer to 4 is also yes, although it is less obvious yes than the preceding ones. We have the problem that we do not have many reliable "continuous" estimations of parliamentarism. But if we look at a list of "Economic miracles" in Wikipedia, there's the Dutch economic miracle (coinciding with more parliamentarism), the six Asian eagles (coinciding with more parliamentarism) France's Trente Glorieuses (1945-1975, which coincided with parliamentarism, but I don't know if any more parliamentarism than the 3rd republic had), the record years of Sweden (same situation, parliamentarism, do not know if more parliamentarism); the Wirtschaftswunder of Germany and Austria. The more recent miracles deserve more study, but even in presidential countries, the miracles usually coincide with a period of greater power in the legislative.