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Why Populist Democracy Promotes Market Liberalization

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Author Info

  • Grosjean, Pauline

    ()
    (University of San Francisco)

  • Senik, Claudia

    ()
    (Paris School of Economics)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3527.

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Length: 37 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3527

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Related research

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

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References

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  1. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
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  4. Irina Denisova & Markus Eller & Timothy Frye & Ekaterina Zhuravskaya, 2007. "Who Wants to Revise Privatization and Why? Evidence from 28 Post-Communist Countries," Working Papers w0105, Center for Economic and Financial Research (CEFIR).
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  15. Grosjean, Pauline & Senik, Claudia, 2007. "Should Market Liberalization precede Democracy ? Causal Relations between Political Preferences and Development," CEPREMAP Working Papers (Docweb) 0704, CEPREMAP.
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Cited by:
  1. Denisova, Irina & Eller, Markus & Zhuravskaya, Ekaterina, 2009. "What do Russians think about transition?," CEPR Discussion Papers 7492, C.E.P.R. Discussion Papers.
  2. 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.
  3. Apolte, Thomas & Peters, Heiko, 2009. "Governance, Demokratie und wirtschaftliche Entwicklung in den ehemals sozialistischen Staaten," IÖB-Diskussionspapiere 1/09, University of Münster, Institute for Economic Education.

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