Over the last century, several waves of democracy have swept over the globe, bringing representative democracy to places where it seemed inconceivable. There are many reasons to be enthusiastic about this historically remarkable development. However, this enthusiasm is dampened by three things. One is that there is only a very weak correlation between established measures of human well-being and measures of the level of democracy. The second reason is that a number of democracies turn out to have severe difficulties managing their public finances in a sustainable way The third problem is that democracy seems not to be a cure against pervasive corruption. This project will use an institutional approach to answer the question why some democracies work better than others. Democratic systems can be institutionalized in innumerous ways given variation in, for example, party system, electoral system, type of public administration, judicial control and legal system to name a few. This variation in the institutional configuration of existing democracies will be used for developing an empirically based theory for explaining the difference in the performance of democracies.