Working Paper: CEPR ID: DP7260
Authors: Irina Denisova; Markus Eller; Timothy Frye; Ekaterina Zhuravskaya
Abstract: Using survey data from 28 transition countries, we test for the complementarity and substitutability of market-relevant skills and institutions. We show that democracy and good governance complement market skills in transition economies. Under autocracy and weak governance institutions there is no significant difference in support for revising privatization between high and low-skilled respondents. As the level of democracy and the quality of governance increases, the difference in the level of support for revising privatization between the high and low skilled grows dramatically. This finding contributes to our understanding of microfoundations of the politics of economic reform.
Keywords: complementarity; perception; privatization; skills; transition
JEL Codes: J2; O0; P0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improved governance (G38) | Increased support for privatization revisions among skilled individuals (L33) |
| Weak governance (H11) | No significant difference in support for revising privatization between high and low-skilled respondents (J24) |
| As governance improves (G38) | Support for revising privatization diverges between high and low-skilled individuals (L33) |
| Democracy and good governance (O17) | High-skilled individuals become more opposed to revising privatization relative to low-skilled counterparts (J79) |
| Institutional environment (D02) | Shapes individual preferences regarding support for economic reforms (D79) |
| Market skills + Good governance (G38) | Align interests of skilled individuals with support for economic reforms (E69) |