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

46 Pages Posted: 17 Jul 2007

See all articles by Pauline Grosjean

Pauline Grosjean

European Bank for Reconstruction and Development (EBRD)

Claudia Senik

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA); Universite Paris IV Sorbonne; IZA Institute of Labor Economics

Date Written: June 2007

Abstract

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.

Keywords: market and democracy, sequencing of development, transition economies, attitudinal variables, cross-country survey

JEL Classification: H1, H5, P2, P3, P5, O1, O12, O57

Suggested Citation

Grosjean, Pauline and Senik, Claudia, Should Market Liberalization Precede Democracy? Causal Relations between Political Preferences and Development (June 2007). IZA Discussion Paper No. 2889, Available at SSRN: https://ssrn.com/abstract=1000135 or http://dx.doi.org/10.2139/ssrn.1000135

Pauline Grosjean

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Claudia Senik (Contact Author)

National Center for Scientific Research - Department and Laboratory of Applied and Theoretical Economics (DELTA) ( email )

ENS, 48, bd Jourdan
75014 Paris
France
+33 1 4313 6312 (Phone)

Universite Paris IV Sorbonne

Department of Economics
75230 Paris Cedex 05
France
01 43 13 63 12 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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