Research Problem: Economic growth and development is a complicated process that falls into the domain of many disciplines in social sciences andhumanities. Therefore to study these fundamental aspects of economic growthsynthesizing in these fields is necessary. In this research using endogenousgrowth models and political literature, we present a model for political economyof growth. The main question that this study is going to answer is the relation

  between democracy and economic growth. There are some well knowndocuments that have studied the relationship between democracy and economicgrowth in the literature in this area. Because of ambiguous results of them, it isneeded to test the relationship by using new data and methods.

  Method: to test the relation between democracy and economic growth, using panel data of 62 countries in the period 1980-2000 in this paper we study theeffects of democracy on economic growth through fixed effects model. Tomeasure democracy index, we use a mixed variable which includes political andfreedom rights. Per capita GDP growth is used to measure economic growth rate.Stata8 and Eviews5 software are used to get econometrics results.

  Concluding remarks: Despite of a lot of studies that focus on the negative effects or inefficiency of democracy, we find the positive and significant effectsof democracy on economic growth.We also come to this conclusion that economic growth negatively is related tothe inflation, interest groups, and government consumption on the other hand itis positively related to the human capital, investment, population growth, femalelabor force, and active population.

  Conclusions: according to results, we conclude that any improvement in the democratic institutions is required to have significant economic growth. Also, tocatch higher economic growth, education enhancing, democratic institutions,reduction in government intervention in economy, investment and increasing in female labor force participation can be helpful.

  JEL-code: O40 O57 O41 Q20 Q30