Economic and Political Liberalizations

By Francesco Giavazzi, Guido Tabellini. Social Science Research Network, 2005

487 citations recorded by the source corpus.

This Paper studies empirically the effects of and the interactions amongst economic and political liberalizations. Economic liberalizations are measured by a widely used indicator that captures the scope of the market in the economy, and in particular of policies towards freer international trade (cf. Sachs and Werner, 1995; Wacziarg and Welch, 2003). Political liberalizations correspond to the event of becoming a democracy. Using a difference-in-difference estimation, we ask what are the effects of liberalizations on economic performance, on macroeconomic policy and on structural policies. The main results concern the quantitative relevance of the feedback and interaction effects between the two kinds of reforms. First, we find positive feedback effects between economic and political reforms. The timing of events indicates that causality is more likely to run from political to economic liberalizations, rather than vice versa, but we cannot rule out feedback effects in both directions. Second, the sequence of reforms matters. Countries that first liberalize and then become democracies do much better than countries that pursue the opposite sequence, in almost all dimensions.

Subfields: Demography, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/f2f04bdc40745f09f469ff512d5523315895fbe4

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Citations in the corpus

Do energy efficiency policies save energy? A new approach based on energy policy indicators (in the EU Member States) (2020, unknown): “Conversely, the difference-in-differences method can be used in macroeconomic analsyis (Giavazzi and Tabellini, 2005; Papaioannou and Siourounis, 2004; Persson, 2005; Persson and Tabellini, 2006; Rodrik and Wacziarg, 2005).”
The Role of the State in Economic Development (2005, unknown): “ Giavazzi and Tabellini (2004) suggest that the answer has to do with the sequence of reforms.”
Does economic freedom fosters banks’ performance? Panel evidence from Malaysia (2010, background): “The earlier studies by among others Acemoglu (2008), Giavazzi and Tabellini (2005), Beck et al. (2003), La Porta et al. (1999), etc., also suggest that the rate of success of an economy critically depends on a good government.”
Economic growth with endogenous corruption: an empirical study (2011, background): “Hausman et al. (2005), e.g., report that most instances of economic reform1 do not produce growth acceleration and Giavazzi and Tabellini (2005) report that reforms affect growth positively after a lag of 4 years and the perception of the quality of governance (corruption) after a lag of 3 years.”
Trade, Democracy, and the Gravity Equation (2010, methodology): “As they pointed out, the current literatures include the works, among others already mentioned, of Grofman and Gray (2000), Quinn (2000), Fidrumc (2001), Giavazzi and Tabellini (2005), and Yu (2007).”
International Trade and Institutional Change (2013, unknown): “Giavazzi and Tabellini (2005) demonstrate that institutional quality rises following trade liberalization episodes.”
Political Versus Economic Institutions in the Growth Process (2014, background): “…for education, the level of economic institutions has a significant coefficient in growth regressions while political institutions do not, and Giavazzi and Tabellini (2005) find that economic liberalizations foster growth, and this effect is magnified if they are accompanied by political…”
The political economy of reforms in central bank design: evidence from a new dataset (2018, unknown): “Previous studies have documented how structural reforms and democratization sometimes come in waves (see Giavazzi and Tabellini, 2005; Giuliano et al., 2013; Acemoglu et al., 2019, among others).”