Economic prosperity determinant and the role of political regime: A statistical and machine learning approach

Nations across the globe strive for sustainable economic growth as a means to achieve economic prosperity (Saxena et al., 2021). Advanced economies, especially those governed by democratic regimes, have achieved economic success, while emerging economies exhibit economic growth trends in both democratic and autocratic systems. In contrast, developing nations, governed by a combination of these regimes, still struggle to achieve economic prosperity. Despite scholars’ efforts to address these disparities, establishing explicit, meaningful, and significant links between economic prosperity and potential explanatory variables has proven challenging (Roll & Talbott, 2003). The extent to which economic growth inherently leads to prosperity, along with the role of political systems and the influence of internal and external factors, remains an area requiring further inquiry. Drawing on the foundational work of Solow’s neoclassic economic growth that was later extended by Islam (1995) to incorporate variations in steady-state income levels across countries, this study examines internal and external factors that contribute to a nation’s long-term prosperity, with a focus on variations in political, geographical, and other macroeconomic factors. This study utilizes a statistical and a machine learning algorithm approach to develop a precise and stable predictive model for estimating economic prosperity across three distinct groups of countries—advanced, emerging, and developing economies. The findings of this study using both approaches indicate that the human development index is a key factor in promoting economic prosperity across all three levels of economic development, but its impact is more pronounced in developing nations. Additionally, the results suggest the presence of an optimal or convergence zone in which the influence of regime type is most pronounced by showing that when a political system becomes excessively democratic or overly autocratic, the moderating capacity of regime type on the relationship between economic freedom and economic prosperity, as well as between technological engagement and economic prosperity, appears to diminish. Consequently, moderate levels of democracy may provide the most conducive institutional environment for leveraging internet use and economic freedom to promote economic prosperity.