Democracy and fiscal-policy response to COVID-19

Sezer Yasar and Ceyhun Elgin

Public Choice, 2024, vol. 198, issue 1, No 3, 25-45

Abstract: Abstract In this paper, we investigate the relationship between the level of democracy and fiscal-policy response to the economic crisis induced by the COVID-19 pandemic. We use a novel cross-country panel dataset of fiscal-policy responses with time variation. Our results suggest that more democratic countries adopted substantially larger fiscal-policy packages (in % GDP), and the gap regarding the size of packages between more democratic and less democratic countries widened over time. Our analysis of the components of fiscal policy shows that democracies, in particular, provide larger packages that benefit the broad public. Furthermore, our system-equations estimations suggest that the relation of democracy level with the fiscal-policy response is established through democracy’s relation with inclusive institutions, represented by the parliamentary system, and corruption.

Keywords: COVID-19; Democracy; Fiscal policy; Parliamentary System; Corruption; Pandemic (search for similar items in EconPapers)
JEL-codes: D72 H12 H30 H59 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Democracy and fiscal-policy responses to COVID-19 (2021)
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DOI: 10.1007/s11127-023-01107-3

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