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Economic Reform, Democracy and Growth during Post-Communist Transition

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  • Fidrmuc, Jan

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.

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  • Fidrmuc, Jan, 2001. "Economic Reform, Democracy and Growth during Post-Communist Transition," CEPR Discussion Papers 2759, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2759
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    More about this item

    Keywords

    Democracy; Elections; Liberalization; Economic performance;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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