Why is Economic Policy Different in New Democracies? Affecting Attitudes About Democracy

36 Pages Posted: 5 Oct 2007 Last revised: 7 Jul 2008

See all articles by Adi Brender

Adi Brender

Bank of Israel - Research Department

Allan Drazen

University of Maryland - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: October 2007

Abstract

When democracy is new, it is often fragile and not fully consolidated. We investigate how the danger of a collapse of democracy may affect fiscal policy in new democracies in comparison to countries where democracy is older and often more established. We argue that the attitude of the citizenry towards democracy is important in preventing democratic collapse, and expenditures may therefore be used to convince them that "democracy works". We present a model focusing on the inference problem that citizens solve in forming their beliefs about the efficacy of democracy. Our approach differs from much of the literature that concentrates on policy directed towards anti-democratic elites, but our model can encompass that view and allows comparison of different apporoaches. We argue that the implications of the model are broadly consistent with the empirical patterns generally observed, including the existence of political budget cycles in new democracies not observed in established democracies.

Suggested Citation

Brender, Adi and Drazen, Allan, Why is Economic Policy Different in New Democracies? Affecting Attitudes About Democracy (October 2007). NBER Working Paper No. w13457. Available at SSRN: https://ssrn.com/abstract=1019461

Adi Brender

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel
+972 2 655 2618 (Phone)
+972 2 655 2657 (Fax)

Allan Drazen (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742-1815
United States
301-405-3477 (Phone)
301-405-7835 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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