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Why Populist Democracy Promotes Market Liberalization

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Author Info
Grosjean, Pauline () (University of California, Berkeley)
Senik, Claudia () (University of Paris IV Sorbonne, PSE)

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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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Publisher 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
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Handle: RePEc:iza:izadps:dp3527

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

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Find related papers by JEL classification:
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
H1 - Public Economics - - Structure and Scope of Government
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
O1 - Economic Development, Technological Change, and Growth - - Economic Development
P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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    Other versions:
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