The Electoral Consequences of the Washington Consensus

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications and read or download them, please visit our web site at: http://www.iadb.org/res Abstract 1This paper assesses how electoral outcomes in both presidential and legislative elections in Latin America have been affected by the adoption of economic policies that seek to improve macroeconomic stability and facilitate the functioning of markets. The database includes 17 Latin American countries for the period 1985-2002, and a total of 66 presidential and 81 legislative elections. The set of testable hypotheses is derived from a review of the literature and is structured around the hypothesis of economic voting. It is found that (i) the incumbent's party is rewarded for reductions in the rate of inflation and, to a lesser extent, for increases in the rate of growth; (ii) the more fragmented or ideologically polarized the party system, the higher the electoral rewards of reducing the inflation rate or raising the economic growth rate; (iii) voters care not only about economic outcomes, but also about some of the policies adopted: while the electorate seems blind to macroeconomic policies such as fiscal or exchange-rate policies, it is averse to pro-market policies, irrespective of their effects on growth or inflation; and (iv) the electorate is more tolerant of promarket reforms when the incumbent's party has a more market-oriented ideology. These results suggest that reforming parties have paid a hefty price for the adoption of pro-market reforms, except when such reforms have been undertaken in conjunction with stabilization policies in high-inflation economies. JEL Classification numbers: D72, D81Key Words: Washington Consensus, Neoliberalism, Elections, Economic voting, Latin America, Politics. 1 We would like to thank Carlos Andrés Gómez for valuable research assistance. We also thank Benito Arrunada, Mauricio Cárdenas, Stephen Kay, Ugo Panizza, Andres Rodríguez-Clare, Mariano Tommasi, Jessica Wallack, and seminar participants at ISNIE-University Pompeu Fabra, LACEA-PEG, Econnet-IDB and the Economia Panel Meeting for comments and sugges...

Workers, Warriors, and Criminals: Social Conflict in General Equilibrium

“…For example, the market-friendly reforms introduced in some Latin American countries have been followed by a rise in crime (reports of increased victimization rates can be found for instance in Alvazzi del Frate 1998). Di Tella and MacCulloch (2005) show that the perception of increased levels of crime leads people to disapprove of market reforms, and Lora and Olivera (2005) show that reformist governments do not appear to have been rewarded at the polls. shaped mainstream policy advice; and the distortion we add to those models, namely the existence of appropriation activities, is both real and economically large.…”

Repudiating or Rewarding Neoliberalism? How Broken Campaign Promises Condition Economic Voting in Latin America

“…These effects are even more pronounced at more extreme levels of economic performance. They indicate that economic voting is conditioned by promise-breaking behaviors, a finding hinted at in earlier works (Lora and Olivera 2005;Stokes 2001).…”

“…Much as Gélineau (2007) finds that re-election seeking strengthens economic voting, Stokes (2001) finds that economic voting is stronger when presidents break their campaign promises, yet this effect is not statistically significant. 5 Lora and Olivera (2005) find that the adoption of neoliberal policies decreases support for the incumbent party, but they do not test whether adherence to campaign promises conditions economic accountability. Thus the evidence that broken campaign promises condition economic voting in Latin America remains unclear.…”

“…President Lucio Gutiérrez of Ecuador, a former coup plotter and antineoliberal presidential candidate, infamously turned on his electoral coalition to pursue the Free Trade Area of the Americas and other neoliberal policies, only to be ousted before he was able to complete his term (Rice and Van Cott 2006). The electorate in Latin America may punish incumbents who break their campaign promises to pursue neoliberal economic policies (Lora and Olivera 2005). Therefore, we hypothesize, H2: Broken campaign promises decrease electoral support for the incumbent, while kept campaign promises increase electoral support for the incumbent.…”

“…While voters in developing democracies may be more willing to follow presidents who break their campaign promises as long as events prove the decision wise (Lora and Olivera 2005), empirical evidence is thus far limited and mixed. Much as Gélineau (2007) finds that re-election seeking strengthens economic voting, Stokes (2001) finds that economic voting is stronger when presidents break their campaign promises, yet this effect is not statistically significant.…”