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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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  15. John F. Helliwell, 1994. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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