This paper provides evidence that democracy has a positive effect on GDP per capita. Using a dynamic panel strategy, the authors control for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy. They introduce a new indicator of democracy that consolidates previous measures. Their baseline results show that democratizations increase GDP per capita by about 20 percent in the long run. Similar effects are found using propensity score reweighting and instrumental-variables strategies. The effects are similar across different levels of development and appear to be driven by greater investments in capital, schooling, and health. The paper addresses several challenges in estimating the causal effect of democracy on GDP, including measurement error in democracy indices, unobserved characteristics of democracies and nondemocracies, and the temporary dip in GDP preceding democratizations. The authors develop a dichotomous measure of democracy that combines several indices to purge spurious changes. They use a dynamic panel model, a semiparametric treatment effects framework, and an instrumental-variables approach to estimate the impact of democracy on GDP. The results suggest that a country transitioning from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the next 25 years than a country that remains a nondemocracy. The effects are robust across different specifications and strategies. The paper also investigates the channels through which democracy increases GDP, suggesting that democracy contributes to growth by increasing investment, encouraging economic reforms, improving the provision of schooling and health care, and reducing social unrest. The results indicate that democracy has a larger impact on growth in countries with greater levels of secondary education. The authors find that democracy does not support the view that it constrains economic growth for countries with low levels of development. The paper contributes to the literature on democracy and economic growth by providing robust evidence of the positive effect of democracy on GDP, controlling for various sources of endogeneity and omitted variables.This paper provides evidence that democracy has a positive effect on GDP per capita. Using a dynamic panel strategy, the authors control for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy. They introduce a new indicator of democracy that consolidates previous measures. Their baseline results show that democratizations increase GDP per capita by about 20 percent in the long run. Similar effects are found using propensity score reweighting and instrumental-variables strategies. The effects are similar across different levels of development and appear to be driven by greater investments in capital, schooling, and health. The paper addresses several challenges in estimating the causal effect of democracy on GDP, including measurement error in democracy indices, unobserved characteristics of democracies and nondemocracies, and the temporary dip in GDP preceding democratizations. The authors develop a dichotomous measure of democracy that combines several indices to purge spurious changes. They use a dynamic panel model, a semiparametric treatment effects framework, and an instrumental-variables approach to estimate the impact of democracy on GDP. The results suggest that a country transitioning from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the next 25 years than a country that remains a nondemocracy. The effects are robust across different specifications and strategies. The paper also investigates the channels through which democracy increases GDP, suggesting that democracy contributes to growth by increasing investment, encouraging economic reforms, improving the provision of schooling and health care, and reducing social unrest. The results indicate that democracy has a larger impact on growth in countries with greater levels of secondary education. The authors find that democracy does not support the view that it constrains economic growth for countries with low levels of development. The paper contributes to the literature on democracy and economic growth by providing robust evidence of the positive effect of democracy on GDP, controlling for various sources of endogeneity and omitted variables.