Why Populist Democracy Promotes Market Liberalization

Pauline Grosjean and Claudia Senik ()

No 3527, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using a new set of micro evidence from an original survey of 28 transition countries, we show that democracy increases citizens’ support for the market by guaranteeing income redistribution to inequality-averse agents. Our identification strategy relies on the restriction of the sample to inhabitants of open borders between formerly integrated countries, where people face the same level of market development and economic inequality, as well as the same historically inherited politico-economic culture. Democratic rights increase popular support for the market. This is true, in particular, of inequality-averse agents, provided that they trust political institutions. Our findings suggest that one solution to the recent electoral backlash of reformist parties in the former socialist block lies in a deepening of democracy.

Keywords: democracy; income inequality; redistribution; market liberalization; trust (search for similar items in EconPapers)
JEL-codes: D63 H1 H53 I38 O1 P26 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-06
New Economics Papers: this item is included in nep-cdm, nep-pol, nep-soc and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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