Working Paper: CEPR ID: DP2759
Authors: Jan Fidrmuc
Abstract: This Paper explores interactions between growth, economic liberalization and democratization during transition. The results can be summarized as follows: (1) Liberalization has a strong positive effect on growth during transition. This holds also when controlling for possible endogeneity of liberalization in growth. (2) Democracy encourages liberalization - countries which introduced greater democracy subsequently progress further in economic liberalization too. (3) Because of its reinforcing effect on liberalization, democracy has a positive overall impact on growth. Nevertheless, the marginal effect of democracy (after controlling for progress in economic liberalization) is negative during early transition. (4) The progress in democratization in turn depends on past economic performance in a surprising manner - the relationship between past growth and subsequent democracy appears negative. (5) Economic performance is an important determinant of electoral outcomes and, in particular, of support for reforms.
Keywords: democracy; economic performance; elections; liberalization
JEL Codes: E63; O11; P26; P27
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Liberalization (F69) | Growth (O00) |
| Democracy (D72) | Liberalization (F69) |
| Democracy (D72) | Growth (O00) |
| Past Growth (O41) | Democracy (D72) |
| Economic Performance (P17) | Electoral Outcomes (K16) |