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By Timothy Frye

Does democracy advertise the construction of industry economies and strong nation associations? Do state-building and market-building pass hand in hand? Or do they paintings at cross-purposes? This booklet examines the connection among state-building and market-building in 25 post-communist nations from 1990 to 2004. in keeping with cross-national statistical analyses, surveys of industrial managers, and case reports from Russia, Bulgaria, Poland, and Uzbekistan, Timothy Frye demonstrates that democracy is linked to extra fiscal reform, more desirable nation associations, and better social transfers whilst political polarization is low. yet he additionally reveals that raises in political polarization hose down the confident impression of democracy by way of making coverage much less predictable. He strains the roots of political polarization to excessive degrees of source of revenue inequality and the institutional legacy of communist rule. via opting for while and the way democracy fosters markets and states, this paintings contributes to long-standing debates in comparative politics, public coverage, and post-communist experiences.

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More specifically, it focuses on how partisan control of the government, the balance of partisan power, and the quality of democratic institutions affect the pace and consistency of economic and institutional reform. 1 Credible commitment problems are inherent in economic and institutional reforms because they promise benefits in the future for changes in behavior today. Consider a government that announces a sweeping reduction on import tariffs. Given this change in policy, firms may want to enter the importing business.

When polarization is low, right executives can rely on revenue from investments by new- and old-economy interests to support dependent populations and thereby avoid having to use inconsistent reforms to buy political support. Somewhat surprisingly, this strategy generates generous payments to the dependent sector because of a robust new private sector. 1, the strategy yields policy that benefits a coalition of interests from the new economy with support from the dependent sector at the expense of old-economy interests.

That is, should we view countries with bad initial conditions for conducting economic and institutional reform as suffering from a birth defect whose effects will persist? Or are these countries struck by a childhood disease that has a pronounced effect early in the transition, but whose impacts recede with time? If the former view is correct, then we should expect to find increasing divergence between countries with weak and strong initial conditions over time. This view suggests that a strong version of path dependence linking initial conditions to economic outcomes is at work in the cases under study.

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