Young Democracies and Government Size: Evidence from Latin America
AbstractWe empirically investigate the hypothesis that when democracies are young, or still fragile and unconsolidated, the size of government (in terms of consumption, debt and share to GDP) tends to increase in an attempt to buy out the electorate, so that democracy becomes acceptable and ?the only game in town?. Our sample includes nine Latin American countries between 1970 and 2007 and the results, based on principal component and panel data analyses (POLS, Fixed E¤ects and SYS-GMM estimators), suggest that the young democracies of Latin America have been indeed associated with bigger governments. Furthermore, we test for the hypothesis that the old dictatorships also engaged in activities which would leave the young democracies with bigger de?cits to be repaid, therefore with bigger governments in their initial stages. This hypothesis is not con?rmed by the analysis conducted here. Finally, there is some evidence that as democracies, and also the electorate, mature over time, the size of government shows signs of reduction.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201113.
Length: 26 pages
Date of creation: Jun 2011
Date of revision:
Democracy; Government; Latin America;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
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