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Does democratization facilitate economic liberalization?

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  • Rode, Martin
  • Gwartney, James D.

Abstract

Previous empirical studies have found that the institutions and policies of democracies are generally more supportive of economic freedom than authoritarian political regimes. This paper employs a new dataset by Cheibub et al. (2010) to examine the impact of transitions to democracy on economic freedom. The dataset identifies 48 political transitions from authoritarianism to democracy since the mid-1970s, for which the data on economic freedom are available. Both cross-sectional and panel data analyses are employed to examine these transitions within the framework of fixed- and random effects models. The results indicate that transitions to democracy are associated with subsequent increases in economic liberalization as measured by changes in the Economic Freedom of the World index. Moreover, the economic liberalization appears to follow the path of an inverted U, ascending for approximately 10years after the democratic transition, but receding thereafter. There was also evidence that stable (long-term) democracies achieved larger increases in economic freedom than authoritarian regimes, while unstable democratic transitions adversely affected economic liberalization.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 28 (2012)
Issue (Month): 4 ()
Pages: 607-619

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Handle: RePEc:eee:poleco:v:28:y:2012:i:4:p:607-619

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Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords: Political regimes; Democratization; Economic freedom; Political instability;

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References

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Cited by:
  1. Niklas Potrafke, 2013. "Policies against Human Trafficking: The Role of Religion and Political Institutions," CESifo Working Paper Series 4278, CESifo Group Munich.
  2. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2014. "Democracy Does Cause Growth," NBER Working Papers 20004, National Bureau of Economic Research, Inc.
  3. Hugo J. Faria & Hugo M. Montesinos-Yufa & Daniel R. Morales, 2014. "Should the Modernization Hypothesis Survive Acemoglu, Johnson, Robinson, and Yared? Some More Evidence," Econ Journal Watch, Econ Journal Watch, vol. 11(1), pages 17-36, January.
  4. Christian Bjørnskov & Jacob Mchangama, 2013. "Do Social Rights Affect Social Outcomes?," Economics Working Papers 2013-18, School of Economics and Management, University of Aarhus.

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