Economic and political liberalizations Giavazzi, Francesco; Tabellini, Guido

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Giavazzi, Francesco ; Tabellini, Guido
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Journal of Monetary Economics
Free trade.; Government expenditures; Economics
Academic; Trade
To link to full-text access for this article, visit this link: Byline: Francesco Giavazzi, Guido Tabellini Keywords: Democracy; Reform; Difference-in-difference; Growth; Institutions Abstract: This paper studies empirically the effects and the interactions of economic and political liberalizations. Economic liberalizations are measured as reforms that increase the scope of the market. Political liberalizations correspond to the event of becoming a democracy. Using difference-in-difference estimation, we study the effects on economic performance, macroeconomic policy and structural policies. Our main contribution is the analysis of the joint effects of both liberalizations, and the finding that the sequence of reforms matters. Countries that first liberalize the economy and then become democracies do much better than countries that pursue the opposite sequence, in almost all dimensions. Author Affiliation: IGIER, Bocconi University, Via Salasco 5, 20136 Milano, Italy Article History: Received 12 May 2005; Accepted 26 May 2005 Article Note: (footnote) [star] Some of the results in this paper first appeared in a paper with the same title presented at the IMF conference on the Middle East and Northern Africa region: Washington DC, April 7,8, 2004.
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