Monday, November 23, 2009

Elections and economy policy

We explore the impact of elections on the quality of economic policy and governance in developing countries. We argue that not only do elections likely have a positive structural effect on economic policy, but they may also have a disruptive cyclical effect. Elections introduce frictions; they are periodic events, the timing of which may affect politicians’ incentives to reform. We also argue that achieving accountability in developing countries requires more than elections. When the quality of the electoral process is poor, elections simply do not create the structural effect we would expect.

We introduce into our estimations proxies for the structural effect of elections (the frequency of elections) and for their cyclical effect (the number of years that separate each year from the nearest election). We find that elections in developing countries have both a cyclical and a structural effect on policy.

An election that is not “free and fair” is a broken technology; it cannot be expected to hold governments accountable to citizens. Hence, the overall conclusion from our analysis is that the frequency and conduct of elections matter. Our results suggest that elections are a key instrument in achieving accountability. But elections fail to achieve accountability if they are infrequent or uncompetitive.

That’s from Chauvet L. and P. Collier, 2009. More here.

Fig: Democracy, elections, and economic policy (82 developing countries, 1978-2004)