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Should Market Liberalization precede Democracy ? Causal Relations between Political Preferences and Development

  • Grosjean, Pauline
  • Senik, Claudia

This paper is dedicated to the relation between market development and democracy. We distinguish contexts and preferences and ask whether it is true that the demand for democracy only emerges after a certain degree of market development is reached, and whether, conversely, democratization is likely to be an obstacle to the acceptation of market liberalization. Our study hinges on a new survey rich in attitudinal variables: the Life in Transition Survey (LITS) conducted in 2006 by the European Bank for Reconstruction and Development and the World Bank, in 28 post-Transition countries. Our identification strategy consists in relying on the specific situation of frontier-zones. We find that democracy enhances the support for market development whereas the reverse is not true. Hence, the relativist argument according to which the preference for democracy is an endogenous by-product of market development is not supported by our data.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 0704.

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Length: 67 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:cpm:docweb:0704
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  1. Roland, Gérard & Verdier, Thierry, 2000. "Law Enforcement and Transition," CEPR Discussion Papers 2501, C.E.P.R. Discussion Papers.
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  6. Gerard Rpland, 2001. "The Political Economy of Transition," William Davidson Institute Working Papers Series 413, William Davidson Institute at the University of Michigan.
  7. Torsten Persson & Guido Tabellini, 2007. "The Growth Effects of Democracy: Is It Heterogenous and How Can It Be Estimated?," Levine's Working Paper Archive 321307000000000969, David K. Levine.
  8. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
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  11. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
  12. Guido Tabellini, 2005. "Culture and Institutions: Economic Development in the Regions of Europe," CESifo Working Paper Series 1492, CESifo Group Munich.
  13. Zhuravskaya Ekatherina, 2000. "Incentives to Provide Local Public Goods: Fiscal Federalism, Russian Style," EERC Working Paper Series 99-15e, EERC Research Network, Russia and CIS.
  14. Lutkepohl, Helmut, 1982. "Non-causality due to omitted variables," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 367-378, August.
  15. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," NBER Working Papers 11993, National Bureau of Economic Research, Inc.
  16. Sergio Godoy & Joseph Stiglitz, 2006. "Growth, Initial Conditions, Law and Speed of Privatization in Transition Countries: 11 Years Later," NBER Working Papers 11992, National Bureau of Economic Research, Inc.
  17. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
  18. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  19. John F. Helliwell, 1992. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
  20. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," NBER Working Papers 11204, National Bureau of Economic Research, Inc.
  21. Jenny A. Minier, 2001. "Is Democracy a Normal Good? Evidence from Democratic Movements," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 996-1009, April.
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