A time to throw stones, a time to reap: how long does it take for democratic transitions to improve institutional outcomes?

Abstract

We study the impact of democratic transitions on institutional outcomes. Using an event study method and a sample of 135 countries over the period 1984–2016, we observe that democratic transitions improve institutional outcomes. The effect appears within 3 years after the transition year. The results are robust to alternative definitions of transitions, alternative codings of pre- and post-transition years, and changing the set of control variables. We also find that both full and partial democratizations improve institutional outcomes. Transitions out of military regimes or communist autocracies do not. The effect of democratization depends on GDP per capita, education, and the regularity of the transition. Finally, the evidence suggests that the effect is particularly clear on the corruption, law and order, and military in politics dimensions of the index.

Democracy and the quality of economic institutions: theory and evidence

“…We still think that the model assumption is plausible in our context because the purpose of our model is to illustrate the short-run consequences of political transitions for institutional quality and one potential source of effect heterogeneity. We argue that focusing on immediate effects is adequate since Méon and Sekkat (2022) and Rode and Gwartney (2012) suggest that most of the changes in economic institutions occur within the first few years after a political transition. Since the level of human capital changes relatively slowly, we can treat it as exogenous factor in our model.…”

“…For empirical studies that examine this relationship, seeAdsera et al (2003),Assiotis and Sylwester (2015), DeHaan and Sturm (2003),Leblang (1996),Lundström (2005),Knutsen (2011),Méon and Sekkat (2022),Pitlik (2008), andRode and Gwartney (2012). The dominant view is that democratic regimes have better economic institutions than autocratic regimes.…”

Democracy and the Quality of Economic Institutions: Theory and Evidence

“…We still think that the model assumption is plausible in our context because the purpose of our model is to illustrate the short-run consequences of political transitions for institutional quality and one potential source of effect heterogeneity. We argue that focusing on immediate effects is adequate since Méon and Sekkat (2022) and occur within the first few years after a political transition. Since the level of human capital changes relatively slowly, we can treat it as exogenous factor in our model.…”

“…Only a few studies examine whether the effect of democracy on institutional quality 3 For empirical studies that examine this relationship, see Adsera et al (2003), Assiotis and Sylwester (2015), De Haan and Sturm (2003), Knutsen (2011), Leblang (1996), Lundström (2005), Méon and Sekkat (2022), Pitlik (2008), and Rode and Gwartney (2012). The dominant view is that democratic regimes have better economic institutions than autocratic regimes.…”

The impact of the institutional environment of the host country on the perception of compliance risk of the international engineering contractor: the moderating effect of absorptive capacity

“…Compared to some developed countries that feature mature regulation systems, many developing countries are undergoing dynamic changes in their institutional environments (Zhao et al, 2014). Because the institutions in some developed countries are relatively complete and stable after the process of amendment, improvement, change and other transitions, developing countries are in an important stage of rapid economic development and institution formation, and are prone to have institutional voids and imperfections (M eon and Sekkat, 2021). As this process is currently at an important stage of problem exposure and rule formation, institutions in some developed countries are likely to be far easier to recognize than in emerging ones (Morrish and Earl, 2021).…”