Working Papers

The Economics of Young Democracies: Policies and Performance--Working Paper 85

3/8/06
Ethan Kapstein and Nathan Converse
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What economic policies are necessary to win popular support, and in turn help support fledgling democracies? Are they necessarily the same as the policies required for tackling difficult issues of economic stabilization and reform? Conversely, what sorts of economic policies are most likely to spark a backlash against young and fragile democratic regimes? Do the leaders of young democracies face trade-offs as they ponder their electoral and economic strategies?


In this Working Paper, Nathan Converse and Ethan Kapstein address these questions and find that deteriorating or stagnant economic performance constitutes a red flag or warning signal that a country is at risk of democratic reversal. They also find considerable variation in economic performance, suggesting that the design of political institutions in new democracies may have a significant influence on the probability of their survival.


The authors first explore the hypothesized relationships between democratic politics and economic policy, as well as the findings of several important empirical studies on the economic performance of young democracies around the world. They then provide some descriptive statistics on how the new democracies have fared in practice, making use of a new dataset.


This paper is a timely and valuable contribution to the literature on democracy and development, given that at least half of the world’s fragile democracies are still struggling to develop their political institutions. Several have reverted back to authoritarian rule. Among the fragile democracies are countries vital to U.S. national security interests, including Afghanistan and Iraq, which makes analysis of this new democratic age an important area for future research.


This working paper provides an overview of a forthcoming CGD monograph on the economics of young democracies.


Related CGD Publications:


  • Weak States and Global Threats: Assessing Evidence of Spillovers, CGD Working Paper 73
  • How Countries Get Rich, CGD Brief
  • Costs and Causes of Zimbabwe's Crisis, CGD Brief