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The Electoral Consequences of the Washington Consensus

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  • Eduardo Lora

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  • Mauricio Olivera

    ()

Abstract

This paper assesses how electoral outcomes in both presidential and legislative elections in Latin America have been affected by the adoption of economic policies that seek to improve macroeconomic stability and facilitate the functioning of markets. The database includes 17 Latin American countries for the period 1985-2002, and a total of 66 presidential and 81 legislative elections. The set of testable hypotheses is derived from a review of the literature and is structured around the hypothesis of economic voting. It is found that (i) the incumbent’s party is rewarded for reductions in the rate of inflation and, to a lesser extent, for increases in the rate of growth; (ii) the more fragmented or ideologically polarized the party system, the higher the electoral rewards of reducing the inflation rate or raising the economic growth rate; (iii) voters care not only about economic outcomes, but also about some of the policies adopted: while the electorate seems blind to macroeconomic policies such as fiscal or exchange-rate policies, it is averse to pro-market policies, irrespective of their effects on growth or inflation; and (iv) the electorate is more tolerant of pro-market reforms when the incumbent’s party has a more market-oriented ideology. These results suggest that reforming parties have paid a hefty price for the adoption of pro-market reforms, except when such reforms have been undertaken in conjunction with stabilization policies in high-inflation economies.

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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal Journal of LACEA Economia.

Volume (Year): (2005)
Issue (Month): ()
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Handle: RePEc:col:000425:008665

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  1. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," Research Department Publications 4293, Inter-American Development Bank, Research Department.
  2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  3. Rafael Di Tella & Robert MacCulloch, 2009. "Why Doesn't Capitalism Flow to Poor Countries?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 285-332.
  4. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Wolfers, Justin, 2002. "Are Voters Rational? Evidence from Gubernatorial Elections," Research Papers 1730, Stanford University, Graduate School of Business.
  6. Thaler, Richard H, et al, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 647-61, May.
  7. Cukierman, A., 1997. "When Does it Take A Nixon To Go To China?," Discussion Paper 1997-91, Tilburg University, Center for Economic Research.
  8. Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
  9. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  10. Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, vol. 93(1), pages 256-264, March.
  11. Sergio Pernice & Federico Sturzenegger, 2004. "Culture and social resistance to reform: a theory about the endogeneity of public beliefs with an application to the case of Argentina," CEMA Working Papers: Serie Documentos de Trabajo. 275, Universidad del CEMA.
  12. Londregan, John & Alesina, Alberto, 1993. "A Model of the Political Economy of the United States," Scholarly Articles 4552529, Harvard University Department of Economics.
  13. Eduardo Lora & Ugo Panizza & Myriam Quispe-Agnoli, 2004. "Reform fatigue: symptoms, reasons, and implications," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 1 - 28.
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Cited by:
  1. Bussolo, Maurizio & De Hoyos, Rafael E. & Medvedev, Denis, 2008. "Is the developing world catching up ? global convergence and national rising dispersion," Policy Research Working Paper Series 4733, The World Bank.
  2. Bonnet, Céline & Dubois, Pierre & Martimort, David & Straub, Stéphane, 2009. "Empirical Evidence on Satisfaction with Privatization in Latin America: Welfare Effects and Beliefs," IDEI Working Papers 566, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Eduardo Lora, 2008. "El futuro de los pactos fiscales en América Latina," Research Department Publications 4614, Inter-American Development Bank, Research Department.
  4. Rafael Di Tella & Sebastian Galiani & Ernesto Schargrodsky, 2008. "Reality versus Propaganda in the Formation of Beliefs about Privatization," NBER Working Papers 14483, National Bureau of Economic Research, Inc.
  5. Jeffrey A. Frankel, 2005. "Contractionary Currency Crashes in Developing Countries," NBER Working Papers 11508, National Bureau of Economic Research, Inc.
  6. Carol Graham, 2008. "Measuring Quality of Life in Latin America: What Happiness Research Can (and Cannot) Contribute," Research Department Publications 4598, Inter-American Development Bank, Research Department.
  7. Rafael Di Tella & Juan Dubra & Robert MacCulloch, 2008. "A Resource Belief-Curse? Oil and Individualism," NBER Working Papers 14556, National Bureau of Economic Research, Inc.
  8. Carro Fernandez, Martha, 2007. "Welcoming Foreign Direct Investment? A Political Economy Approach to FDI Policies in Argentina and Brazil," MPRA Paper 47252, University Library of Munich, Germany.

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