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Liberalization, democracy and economic performance during transition

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  • Fidrmuc, Jan

Abstract

This paper analyzes the inter-relations between economic and political processes during transition in 25 post-communist countries of Central and Eastern Europe and the former Soviet Union. The main findings are the following: First, economic liberalization generally has positive effect on growth even when controlling for initial conditions. The effect is U-shaped during the contraction and linear during the recovery, but in both periods complete liberalization is superior to no liberalization. Second, democracy has a negative effect on growth during the contraction, whereas its effect appears insignificant during the recovery. Third, economic performance is a strong determinant of support for the reform in elections: support for the reform falls with unemployment and increases with economic growth, output level relative to 1989, and, surprisingly, inflation. Finally, economic liberalization per se increases opposition against the reform, as the costs of the reform apparently go beyond deteriorating economic performance. The level of democracy, in contrast, increases the support for the reform. --

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Bibliographic Info

Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 05-2000.

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Date of creation: 2000
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Handle: RePEc:zbw:zeiwps:b052000

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Related research

Keywords: Democracy; Economic Liberalization; Economic Performance; voting;

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References

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  1. Nauro Campos, 1999. "Back to the Future: The Growth Prospects of Transition Economies Reconsidered," William Davidson Institute Working Papers Series 229, William Davidson Institute at the University of Michigan.
  2. Dethier, Jean-Jacques & Ghanem, Hafez & Zoli, Edda, 1999. "Does democracy facilitate the economic transition : an empirical study of Central and Eastern Europe and the Former Soviet Union," Policy Research Working Paper Series 2194, The World Bank.
  3. Guillermo A. Calvo & Fabrizio Coricelli, 1993. "Output Collapse in Eastern Europe: The Role of Credit," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 32-52, March.
  4. Fidrmuc, J., 1998. "Political Support for Reforms: Economics of Voting in Transition Countries," Discussion Paper 1998-98, Tilburg University, Center for Economic Research.
  5. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
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Cited by:
  1. de Haan, Jakob & Sturm, Jan-Egbert, 2003. "Does more democracy lead to greater economic freedom? New evidence for developing countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 547-563, September.
  2. Nauro F. Campos & Fabrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," William Davidson Institute Working Papers Series 470, William Davidson Institute at the University of Michigan.
  3. Andreas Freytag, 2002. "Accession to EMU and exchange rate policies in Central Europe - decision under institutional constraints," Bank of Estonia Working Papers 2002-1, Bank of Estonia, revised 12 Oct 2002.
  4. Bernd Hayo, 2001. "On Democratization and Economic Conditions in Eastern Europe," Development and Comp Systems 0106001, EconWPA.
  5. Lundström, Susanna, 2002. "Decomposed Effects of Democracy on Economic Freedom," Working Papers in Economics 74, University of Gothenburg, Department of Economics.

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