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Young Democracies and Government Size: Evidence from Latin America

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  • Manoel Bittencourt

    ()
    (Department of Economics, University of Pretoria)

Abstract

We 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 Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201113.

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Length: 26 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:pre:wpaper:201113

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Keywords: Democracy; Government; Latin America;

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References

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  1. Alberto Alesina & Filipe R. Campante & Guido Tabellini, 2008. "Why is Fiscal Policy Often Procyclical?," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1006-1036, 09.
  2. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  4. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2003. "Opportunistic Political Cycles: Test in a Young Democracy Setting," Working Papers w0024, Center for Economic and Financial Research (CEFIR).
  5. Woo, Jaejoon, 2003. "Economic, political, and institutional determinants of public deficits," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 387-426, March.
  6. Manoel Bittencourt, 2011. "Is Copacabana Still the ‘Little Princess of the Sea’?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(1), pages 11-16, 03.
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Cited by:
  1. Manoel Bittencourt, 2010. "Inflation and Economic Growth in Latin America: Some Panel Time-Series Evidence," Working Papers 201011, University of Pretoria, Department of Economics.

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