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Democracy and pro-market sentiments

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  • Rayamajhee, Veeshan

Abstract

This study identifies 44 democratic transitions from 1980–2023 and estimates their effect on pro-market sentiments using a stacked difference-in-differences design. Democratic transitions reduce pro-market sentiments by 0.345 standard deviations on average. Yet the average masks a striking dynamic: a honeymoon spike more than four times the magnitude of the average decline, which reverses within two years. Cases of democratic deepening, where existing democracies further strengthened democratic governance, exhibit similar dynamics. The pattern survives a direct mean reversion test: countries with high and low baseline sentiments both exhibit the honeymoon spike. Falsification tests confirm the effect is specific to market attitudes, not a generic attitudinal shift. Declining beliefs in private ownership drive the negative medium-term effect even as acceptance of personal responsibility rises, suggesting ideological reconfiguration rather than uniform attitude decay. These findings indicate that the ideological foundations of market economies do not automatically consolidate alongside democratic institutions.

Suggested Citation

  • Rayamajhee, Veeshan, 2026. "Democracy and pro-market sentiments," Journal of Economic Behavior & Organization, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:jeborg:v:248:y:2026:i:c:s0167268126001903
    DOI: 10.1016/j.jebo.2026.107604
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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General

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