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Economic Reform, Democracy and Growth During Post-communist Transition

Jan Fidrmuc
Brunel University - Department of Economics and Finance; Centre for Economic Policy Research (CEPR); University of Michigan at Ann Arbor - The William Davidson Institute

March 2001

William Davidson Institute Working Paper No. 372

Abstract:
This paper explores interactions between growth, economic liberalization and democratization during transition. The results can be summarized as follows: (1) Liberalization has a strong positive effect on growth during transition (also when controlling for endogeneity of liberalization in growth). (2) Democracy facilitates economic liberalization. (3) Because of its effect on liberalization, democracy has a positive overall effect on growth. Nevertheless, the marginal effect of democracy (after controlling for progress in economic liberalization) is negative during early transition. (4) The progress in democratization in turn depends on past economic performance in a surprising manner-the relationship between past growth and subsequent democracy appears negative. (5) Economic performance is an important determinant of electoral outcomes and, in particular, of support for reforms.

Keywords: Democracy, liberalization, economic performance, elections

JEL Classifications: E63, O11, P26, P27

Working Paper Series

Date posted: August 13, 2001 ; Last revised: May 23, 2003

Suggested Citation

Fidrmuc, Jan, Economic Reform, Democracy and Growth During Post-communist Transition (March 2001). William Davidson Institute Working Paper No. 372. Available at SSRN: http://ssrn.com/abstract=279819 or doi:10.2139/ssrn.279819

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