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Elections and Economic Policy in Developing Countries

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  • Lisa Chauvet

    ()
    (DIAL, IRD, Paris)

  • Paul Collier

    ()
    (CSAE, Oxford)

Abstract

This paper explores the impact of elections on economic policies and governance in developing countries. We distinguish between a structural effect, which increases accountability, and a cyclical effect which may be disruptive. Since the effects are offsetting, neither can be analyzed in isolation. We implement an econometric analysis on more than 80 developing countries using positive changes in the Country Policy and Institutional Assessment of the World Bank and the International Country Risk Guide as signaling improvements in economic policy and governance. We find that both structural and cyclical effects matter. The cyclical effect suggests that mid-term is the best moment for policy change. We investigate the structural effect by comparing different frequencies of elections. Except at the extremes, a higher frequency of elections improves both policy and governance net of any cyclical effect. The important exception to this benign net effect is if the electoral process is badly conducted. Badly conducted elections have no structural efficacy for policy improvement. A reasonable interpretation of our results is that honest elections increase accountability and thereby discipline governments to improve economic policy and governance, but that if candidates can win by fraud this chain is broken.________________________________ Cet article analyse l’influence des élections sur les politiques économiques et la gouvernance dans les pays en développement. Nous distinguons un effet structurel des élections – via la responsabilité politique – d’un effet cyclique potentiellement perturbateur. Puisque ces deux effets se compensent, ils ne peuvent être considérés séparément. Nous menons une analyse économétrique sur un échantillon de 80 pays en développement pour identifier l’impact des élections sur l’amélioration des politiques économiques. Nous utilisons les changements positifs du Country Policy and Institutional Assessment de la Banque mondiale et de l’International Country Risk Guide pour saisir les améliorations des politiques économiques et de la gouvernance. Nous trouvons que l’effet structurel et l’effet cyclique des élections sont tous deux importants. L’effet cyclique des élections suggère que les améliorations de politiques économiques sont plus probables à mi-mandat. Nous utilisons la fréquence des élections pour saisir leur effet structurel. Il semble que des élections fréquentes améliorent la qualité des politiques économiques et de la gouvernance, une fois pris en compte leur effet cyclique. Une exception importante à cet effet structurel positif concerne les élections dont le processus est mal mené : elles n’ont dans ce cas pas d’effet structurel positif. Il semble donc que des élections honnêtes augmentent la responsabilité politique des gouvernements et les incitent ainsi à améliorer les politiques économiques et la gouvernance ; mais si le candidat peut gagner par fraude, cette chaine est rompue.

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Bibliographic Info

Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2008/11.

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Length: 40 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:dia:wpaper:dt200811

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Keywords: Elections; economic policy; developing countries; politique économique; pays en développement;

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References

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
  3. Alesina, Alberto & La Ferrara, Eliana, 2005. "Ethnic Diversity and Economic Performance," Scholarly Articles 4553005, Harvard University Department of Economics.
  4. Pedro C. Vicente, 2007. "Is Vote Buying Effective? Evidence from a Randomized Experiment in West Africa," Economics Series Working Papers 318, University of Oxford, Department of Economics.
  5. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  6. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  7. Sevestre, P. & Trognon, A., 1985. "A note on autoregressive error components models," Journal of Econometrics, Elsevier, vol. 28(2), pages 231-245, May.
  8. Paul Collier & Dominic Rohner, 2008. "Democracy, Development, and Conflict," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 531-540, 04-05.
  9. Block, Steven A., 2002. "Political business cycles, democratization, and economic reform: the case of Africa," Journal of Development Economics, Elsevier, vol. 67(1), pages 205-228, February.
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Citations

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Cited by:
  1. Paul Collier & Pedro Vicente, 2012. "Violence, bribery, and fraud: the political economy of elections in Sub-Saharan Africa," Public Choice, Springer, vol. 153(1), pages 117-147, October.
  2. Smets, Lodewijk & Knack, Stephen, 2014. "World Bank lending and the quality of economic policy," Policy Research Working Paper Series 6924, The World Bank.
  3. Armey, Laura E. & McNab, Robert M., 2012. "Democratization and civil war," MPRA Paper 42460, University Library of Munich, Germany.
  4. Hélène EHRHART, 2010. "Elections and the structure of taxation in developing countries," Working Papers 201027, CERDI.
  5. Stefan Dercon & Roxana Gutiérrez-Romero, 2010. "Triggers and Characteristics of the 2007 Kenyan Electoral Violence," CSAE Working Paper Series 2010-12, Centre for the Study of African Economies, University of Oxford.
  6. Paul Collier & Anke Hoeffler, 2009. "Democracy's Achilles Heel or, How to Win an Election without Really Trying," Economics Series Working Papers CSAE WPS/2009-08, University of Oxford, Department of Economics.
  7. Paul Collier & Anke Hoeffler, 2010. "Do Elections Matter for Economic Performance," Economics Series Working Papers CSAE WPS/2010-35, University of Oxford, Department of Economics.

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