MODELLING THE IMPACT OF THE LEVEL OF DEMOCRACY IN A COUNTRY ON ITS ECONOMIC DEVELOPMENT

Abstract

B a c k g r o u n d. The level of democracy significantly influences countries' economic development, yet the nature and strength of this impact remain subjects of active debate. Globalization, economic integration, and regional differences emphasize the need for an in-depth examination of the relationships between political and economic indicators. The study aims to assess the impact of democracy levels on key economic indicators, such as GDP per capita, household consumption, inflation, exports and others, using regression analysis and machine learning techniques. The objectives include constructing global and local models, analyzing regional variations and differences between countries with varying democratic dynamics, and identifying key factors influencing economic growth.

M e t h o d s. The research is based on global data from 180 countries over the period 1991–2022, sourced from the V-Dem project and World Bank databases. The methods include pairwise regression for assessing democracy's impact on specific economic indicators and decision trees for determining complex relationships between political, economic, and geographic factors. Case studies of countries with significant changes in democracy levels were separately analyzed.

R e s u l t s. The analysis reveals a predominantly positive impact of democracy on economic growth, including increases in GDP, exports, and household consumption, alongside reductions in inflation and government debt. The constructed decision tree revealed complex interactions between geographic, economic, and political factors in determining democracy levels, with a classification accuracy of 54.25 %. Detailed analysis of individual countries demonstrated positive effects of democratization on economic indicators in Georgia, South Africa, Indonesia, and Malaysia, while declining democracy levels in Venezuela and China showed mixed economic consequences.

C o n c l u s i o n s. Democratic development positively affects economic well-being in most countries, though the effects vary by region. Recommendations for optimizing social structures include strengthening democratic institutions, enhancing economic freedoms, and combating corruption. The research findings can be applied in developing state policies.