Does your government make you happy?

Democracy and Development: The Devil in the Details
by Torsten Persson, Guido Tabellini  –  #11993 (EFG)

Abstract: Does democracy promote economic development? We review recent
attempts to address this question, which exploit the within-country
variation associated with historical transitions in and out of
democracy.  The answer is positive, but depends — in a subtle way —
on the details of democratic reforms.  First, democratizations and
economic liberalizations in isolation each induce growth
accelerations, but countries liberalizing their economy before
extending political rights do better than those carrying out the
opposite sequence.  Second, different forms of democratic government
and different electoral systems lead to different fiscal trade
policies: this might explain why new presidential democracies grow
faster than new parliamentary democracies.  Third, it is important to
distinguish between expected and actual political reforms:
expectations of regime change have an independent effect on growth,
and taking expectations into account helps identify a stronger growth
effect of democracy.

How’s Your Government? International Evidence Linking Good
Government and Well-Being

by John F. Helliwell, Haifang Huang  –  #11988 (EFG)

Abstract: In this paper we employ World Values Survey measures of life
satisfaction as though they were direct measures of utility, and use
them to evaluate alternative features and forms of government in
large international samples.  We find that life satisfaction is more
closely linked to several World Bank measures of the quality of
government than to real per capita incomes, in simple correlations
and more fully specified models explaining international differences
in life satisfaction.  We test for differences in the relative
importance of different aspects of good government, and find a
hierarchy of preferences that depends on the level of development.
The ability of governments to provide a trustworthy environment, and
to deliver services honestly and efficiently, appears to be of
paramount importance for countries with worse governance and lower
incomes.  The balance changes once acceptable levels of efficiency,
trust and incomes are achieved, when more value is attached to
building and maintaining the institutions of electoral democracy.

Growth, Initial Conditions, Law and Speed of Privatization in
Transition Countries: 11 Years Later

by Sergio Godoy, Joseph Stiglitz  –  #11992 (EFG LE)

Abstract: This paper examines alternative hypotheses concerning the
determinants of success in the transition from Communism to the
market.  In particular, we look at whether speed of privatization,
legal institutions or initial conditions are more important in
explaining the growth of the transition countries in the years since
the end of the Cold War.  In the mid 90s a large empirical literature
attempted to relate growth to policy measures.  A standard conclusion
of this literature was the faster countries privatized and
liberalized, the better.  We now have more data, so we can check
whether these conclusions are still valid six years later.
Furthermore, much of the earlier work was flawed since it did not
adequately treat problems of endogeneity, confused issues of speed
and level of privatization, and did not face up to the problems of
multicollinearity.  Our results suggest that, contrary to the earlier
literature, the speed of privatization is negatively associated with
growth, but is confirms the result of the few earlier studies that
have found that legal institutions are very important.  Other
variables, which seemed to play a large role in the earlier
literature, appear to have at most a marginal positive effect.