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Should Market Liberalization Precede Democracy? Causal Relations between Political Preferences and Development

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Author Info
Pauline Grosjean () (European Bank for Reconstruction and Development)
Claudia Senik () (Paris School of Economics, University Paris-IV Sorbonne, IUF and IZA)

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Abstract

This paper is dedicated to the relation between market development and democracy. We distinguish contexts and preferences and ask whether it is true that the demand for democracy only emerges after a certain degree of market development is reached, and whether, conversely, democratization is likely to be an obstacle to the acceptation of market liberalization. Our study hinges on a new survey rich in attitudinal variables: the Life in Transition Survey (LITS) conducted in 2006 by the European Bank for Reconstruction and Development and the World Bank, in 28 post-Transition countries. Our identification strategy consists in relying on the specific situation of frontier-zones. We find that democracy enhances the support for market development whereas the reverse is not true. Hence, the relativist argument according to which the preference for democracy is an endogenous byproduct of market development is not supported by our data.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2889.

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Length: 46 pages
Date of creation: Jun 2007
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Handle: RePEc:iza:izadps:dp2889

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Related research
Keywords: market and democracy; sequencing of development; transition economies; attitudinal variables; cross-country survey;

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Find related papers by JEL classification:
H1 - Public Economics - - Structure and Scope of Government
H5 - Public Economics - - National Government Expenditures and Related Policies
P2 - Economic Systems - - Socialist Systems and Transition Economies
P3 - Economic Systems - - Socialist Institutions and Their Transitions
P5 - Economic Systems - - Comparative Economic Systems
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," NBER Working Papers 11204, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Persson, Torsten & Tabellini, Guido, 2006. "Democracy and Development: The Devil in the Details," CEPR Discussion Papers 5499, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May. [Downloadable!]
  6. Guido Tabellini, 2007. "Culture and Institutions: Economic Development in the Regions of Europe," Levine's Working Paper Archive 321307000000000974, David K. Levine. [Downloadable!]
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  7. Torsten Persson & Guido Tabellini, 2007. "The Growth Effect of Democracy: Is It Heterogenous and How Can It Be Estimated?," NBER Working Papers 13150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Djankov, Simeon & Freund, Caroline, 2000. "Disintegration," CEPR Discussion Papers 2545, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Giavazzi, Francesco & Tabellini, Guido, 2005. "Economic and political liberalizations," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1297-1330, October. [Downloadable!] (restricted)
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  13. Gerard Rpland, 2001. "The Political Economy of Transition," William Davidson Institute Working Papers Series 413, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  14. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Jenny A. Minier, 2001. "Is Democracy a Normal Good? Evidence from Democratic Movements," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 996-1009, April.
  16. Raquel Fernandez & Alessandra Fogli, 2005. "Culture: an empirical investigation of beliefs, work, and fertility," Staff Report 361, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  17. Dewatripont, M & Roland, G, 1992. "The Virtues of Gradualism and Legitimacy in the Transition to a Market Economy," Economic Journal, Royal Economic Society, vol. 102(411), pages 291-300, March. [Downloadable!] (restricted)
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  18. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Grosjean, Pauline & Senik, Claudia, 2008. "Why Populist Democracy Promotes Market Liberalization," IZA Discussion Papers 3527, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Pauline Grosjean & Claudia Senik, 2008. "How populist democracy promotes market liberalization," PSE Working Papers 2008-39, PSE (Ecole normale supérieure). [Downloadable!]
  3. Brigitte Granville & Judith Shapiro, 2008. "Scratch a Would-Be Planner: Robbins, Neoclassical Economics and the End of Socialism," Working Papers 11, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
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