Inequality and Sequence of Economic Liberalization and Democratization
Some recent empirical studies found positive effects of economic liberalization on democratization. Based on these findings, this paper explains why the sequence of economic liberalization and democratization is related to the effects of the two reforms on economic performance. Since economic liberalization increases the probability of democratization and democratization leads to income redistribution, in an economy with large inequality between the elite and the poor, the elite do not implement economic liberalization, and democratization occurs first. In such an economy, the effects of economic liberalization and democratization are lower because of distortions caused by large-scale income redistribution.
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- Papaioannou, Elias & Siourounis, Gregorios, 2008.
"Economic and Social Factors Driving the Third Wave of Democratization,"
CEPR Discussion Papers
6986, C.E.P.R. Discussion Papers.
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CEPR Discussion Papers
576, C.E.P.R. Discussion Papers.
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