DRI Working Paper No. 94
By William Easterly and Steven Pennings
National leaders – especially autocratic ones - are often given credit for high average rates of economic growth while they are in office (and draw criticism for poor growth rates). Drawing on the literature assessing the performance of schoolteachers and a simple variance components model, we develop a new methodology to produce optimal (least squares) estimates of each leader’s contribution to economic growth. We find that even in the world where leaders affect growth, the average rate of growth during a leader’s tenure is mostly uninformative about that leader’s contribution to growth. Interestingly, we also find that the average growth rate during a leader’s tenure is more revealing about true performance in democracies rather than autocracies, largely because autocratic countries have more noisy growth processes. Using the model, we provide estimates of the (unobservable) contribution of individual leaders to growth. We find that least squares estimates of individual leader contributions vary at least as much across democrats as autocrats. We also produce new estimates of the variance of leader effects in general and find that they are at least as large in democracies as autocracies (and are sometimes very small in the latter).