The Economics of Young Democracies: Policies and Performance
Since the “third wave” of democratization began in 1974, nearly 100 states have adopted democratic forms of government, including, of course, most of the former Soviet bloc nations. Policy-makers in the west have expressed the hope that this democratic wave will extend even further, to the Middle East and onward to China. But the durability of this new democratic age remains an open question. By some accounts, at least half of the world’s young democracies—often referred to in the academic literature as being “unconsolidated” or “fragile”—are still struggling to develop their political institutions, and several have reverted back to authoritarian rule. Among the countries in the early stages of democratic institution building are states vital to U.S. national security interests, including Afghanistan and Iraq. The ability of fledgling democracies to maintain popular support depends in part on the ability of their governments to deliver economic policies that meet with widespread approval. But what sorts of economic policies are these, and are they necessarily the same as the policies required for tackling difficult issues of economic stabilization and reform? Conversely, what sorts of economic policies are most likely to spark a backlash against young and fragile democratic regimes? Do the leaders of young democracies face trade-offs as they ponder their electoral and economic strategies? These are among the questions we explore in this paper, which provides an overview of the monograph we are currently writing on the economics of young democracies. We do so first by exploring the hypothesized relationships between democratic politics and economic policy, as well as the findings of several important empirical studies with respect to the economic performance of young democracies around the world. We then provide some descriptive statistics on how the new democracies have fared in practice, making use of a new dataset that we have compiled (and which, among other things, is more up-to-date than most others cited herein). Do the data reveal any distinctive economic patterns with respect to democratic consolidation and reversal? We will show that they do. In particular, we find that deteriorating or stagnant economic performance constitutes a red flag or warning signal that the country is at risk of democratic reversal. Moreover, we find considerable variation in economic performance, suggesting that the design of political institutions in new democracies may have a significant influence on the probability of their survival.
|Date of creation:||Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Papaioannou, Elias & Siourounis, Gregorios, 2008.
"Democratization and Growth,"
CEPR Discussion Papers
6987, C.E.P.R. Discussion Papers.
- Elias Papaioannou & Gregorios Siourounis, 2007. "Democratization And Growth," CEDI Discussion Paper Series 07-13, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Elias Papaioannou & Gregorios Siourounis, 2008. "Democratization and Growth," Working Papers 00027, University of Peloponnese, Department of Economics.
- Rigobon, Roberto & Rodrik, Dani, 2004.
"Rule of Law, Democracy, Openness and Income: Estimating the Interrelationships,"
CEPR Discussion Papers
4653, C.E.P.R. Discussion Papers.
- Roberto Rigobon & Dani Rodrik, 2004. "Rule of Law, Democracy, Openness, and Income: Estimating the Interrelationships," NBER Working Papers 10750, National Bureau of Economic Research, Inc.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
- Rogoff, Kenneth, 1990.
"Equilibrium Political Budget Cycles,"
American Economic Review,
American Economic Association, vol. 80(1), pages 21-36, March.
- Dominique Guillaume and David Stasavage, 1999. "Making and breaking monetary policy rules: the experience of African countries," Economics Series Working Papers WPS/1999-02, University of Oxford, Department of Economics.
- Dominique Guillaume & David Stasavage, 1999. "Making and breaking monetary policy rules: the experience of African countries," CSAE Working Paper Series 1999-02, Centre for the Study of African Economies, University of Oxford.
- Beck, Thorsten & Laeven, Luc, 2005.
"Institution building and growth in transition economies,"
Policy Research Working Paper Series
3657, The World Bank.
- Thorsten Beck & Luc Laeven, 2006. "Institution building and growth in transition economies," Journal of Economic Growth, Springer, vol. 11(2), pages 157-186, June.
- Beck, T.H.L. & Laeven, L., 2006. "Institution building and growth in transition economies," Other publications TiSEM b872919e-8dac-46d6-9c0a-6, Tilburg University, School of Economics and Management.
- Beck, Thorsten & Laeven, Luc, 2006. "Institution Building and Growth in Transition Economies," CEPR Discussion Papers 5718, C.E.P.R. Discussion Papers.
- 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.
- Keefer, Philip, 2005. "Democratization and clientelism: why are young democracies badly governed?," Policy Research Working Paper Series 3594, The World Bank.
- Brender, Adi & Drazen, Allan, 2005.
"Political budget cycles in new versus established democracies,"
Journal of Monetary Economics,
Elsevier, vol. 52(7), pages 1271-1295, October.
- Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
- Bourguignon, F. & Morrisson, C., 1990.
"Income distribution, development and foreign trade : A cross-sectional analysis,"
European Economic Review,
Elsevier, vol. 34(6), pages 1113-1132, September.
- Bourguignon, F. & Morrisson, C., 1989. "Income Distribution, Development and Foreign Trade: A Cross-Sectional Analysis," DELTA Working Papers 89-05, DELTA (Ecole normale supérieure).
- Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
- repec:fth:oxesaf:99-2 is not listed on IDEAS
- William Easterly & Ross Levine, 1997.
"Africa's Growth Tragedy: Policies and Ethnic Divisions,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(4), pages 1203-1250.
- Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
- Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
- Bardhan, Pranab & Yang, Tsung-Tao, 2004.
"Political Competition in Economic Perspective,"
Department of Economics, Working Paper Series
qt1907c39n, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ramey, Garey & Ramey, Valerie A, 1995.
"Cross-Country Evidence on the Link between Volatility and Growth,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1138-51, December.
- Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
- Milner, Helen V. & Kubota, Keiko, 2005. "Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries," International Organization, Cambridge University Press, vol. 59(01), pages 107-143, January.
- Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
- Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
- Ethan B. Kapstein & Branko Milanovic, 2003. "Income and Influence: Social Policy in Emerging Market Economies," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number iai, November.
- Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
- Minier, Jenny A, 1998. "Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-66, September.
- Arvind Subramanian & Shanker Satyanath, 2004. "What Determines Long-Run Macroeconomic Stability? Democratic Institutions," IMF Working Papers 04/215, International Monetary Fund.
- Steven A. Block & Karen E. Ferree & Smita Singh, 2003. "Multiparty Competition, Founding Elections and Political Business Cycles in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(3), pages 444-468, September.
- Dani Rodrik & Romain Wacziarg, 2005. "Do Democratic Transitions Produce Bad Economic Outcomes?," American Economic Review, American Economic Association, vol. 95(2), pages 50-55, May.
- William Easterly & Jozef Ritzen & Michael Woolcock, 2006.
"Social Cohesion, Institutions, And Growth,"
Economics and Politics,
Wiley Blackwell, vol. 18(2), pages 103-120, 07.
- Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, vol. 49(2), pages 155-70.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:553. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.