Democracy may encourage growth through: economic reforms, increasing human capital (especially through primary schooling), increasing investment, and reducing social unrest.

"Overall, we take these results as suggesting that democracy might be working through a number of channels, in particular, by encouraging economic reforms, increasing human capital (especially primary schooling), and raising state capacity and some aspects of public services (especially re- lated to health) as well as, to some degree, increasing investment and reducing social unrest. Of course, our strategy does not allow us to conclusively establish that these are the most important mechanisms, but the fact that these variables increase following a democratization even controlling for lags of GDP per capita suggests they are prime candidates for the channels through which democracy might be causing higher GDP."

econometric