Does Democracy Facilitate the Economic Transition? An Empirical Study of Central and Eastern Europe and the Former Soviet Union

30 Pages Posted: 20 Apr 2016

Date Written: June 1999

Abstract

Empirical analysis shows that democracy has facilitated economic liberalization in 25 postcommunist countries of Central and Eastern Europe and the former Soviet Union. The existence of a vibrant civil society at the start of the transition has the most explanatory power in this team's regressions.

Dethier, Ghanem, and Zoli analyze whether political freedom and civil liberties help or hinder economic liberalization, using panel data from 25 postcommunist countries of Central and Eastern Europe and the former Soviet Union between 1992 and 1997.

Building on arguments and counter-arguments put forth in recent literature, they identify the channels through which political freedom affects economic liberalization during the transition. Then they test the arguments empirically with an econometric framework that takes into account possible problems with simultaneity between the economic and political transitions.

Their empirical findings clearly reveal that democracy has facilitated economic liberalization in countries of Central and Eastern Europe and the former Soviet Union.

This conclusion is confirmed under various model specifications, for both ordinary and two-stage least squares procedures and using two different measures of liberalization.

The econometric results reveal that the existence of a vibrant civil society at the start of the transition has the most explanatory power in the authors' regressions.

This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - was presented at a seminar at the World Bank in April 1999. The authors may be contacted at Internet address hghanem@worldbank.org, jdethier@worldbank.org, or ezoli@worldbank.org.

Suggested Citation

Dethier, Jean-Jacques and Ghanem, Hafez and Zoli, Edda, Does Democracy Facilitate the Economic Transition? An Empirical Study of Central and Eastern Europe and the Former Soviet Union (June 1999). World Bank Policy Research Working Paper No. 2194. Available at SSRN: https://ssrn.com/abstract=623946

Jean-Jacques Dethier (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jdethier

Hafez Ghanem

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Edda Zoli

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
368
Abstract Views
1,841
rank
83,577
PlumX Metrics