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How populist democracy promotes market liberalization

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Author Info

  • Pauline Grosjean

    (UC BERKELEY - Berkeley University of California - UC Berkeley)

  • Claudia Senik

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, UP4 - Université Paris 4, Paris-Sorbonne - Université Paris IV - Paris Sorbonne - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Abstract

Using a new set of micro evidence from an original survey of 28 transition countries, we show that democracy increases citizens' support for the market by guaranteeing income redistribution to inequality-averse agents. Our identification strategy relies on the restriction of the sample to inhabitants of open borders between formerly integrated countries, where people face the same level of market development and economic inequality, as well as the same historically inherited politico-economic culture. Democratic rights increase popular support for the market. This is true, in particular, of inequality-averse agents, provided that they trust political institutions. Our findings suggest that one solution to the recent electoral backlash of reformist parties in the former socialist block lies in a deepening of democracy.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00586284.

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Date of creation: Jul 2008
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Handle: RePEc:hal:psewpa:halshs-00586284

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586284
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Related research

Keywords: democracy ; income inequality ; redistribution ; market liberalization ; trust;

References

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  1. Roland, G. & Verdier, T., 2000. "Law Enforcement and Transition," DELTA Working Papers 2000-25, DELTA (Ecole normale supérieure).
  2. Torsten Persson & Guido Tabellini, 2006. "Democratic Capital: The Nexus of Political and Economic Change," NBER Working Papers 12175, National Bureau of Economic Research, Inc.
  3. Grosjean, Pauline & Senik, Claudia, 2007. "Should Market Liberalization Precede Democracy? Causal Relations between Political Preferences and Development," IZA Discussion Papers 2889, Institute for the Study of Labor (IZA).
  4. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07.
  5. Denisova, Irina & Eller, Markus & Frye, Timothy & Zhuravskaya, Ekaterina, 2007. "Who Wants to Revise Privatization and Why? Evidence from 28 Post-Communist Countries," CEPR Discussion Papers 6603, C.E.P.R. Discussion Papers.
  6. Daron Acemoglu & María Angélica Bautista & Pablo Querubín & James A. Robinson, 2007. "Economic and Political Inequality in Development: The Case of Cundinamarca, Colombia," NBER Working Papers 13208, National Bureau of Economic Research, Inc.
  7. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  8. Hayo, Bernd, 2004. "Public support for creating a market economy in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 720-744, December.
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Citations

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Cited by:
  1. Denisova, Irina & Eller, Markus & Frye, Timothy & Zhuravskaya, Ekaterina, 2009. "Who Wants To Revise Privatization? The Complementarity of Market Skills and Institutions," CEPR Discussion Papers 7260, C.E.P.R. Discussion Papers.

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