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Economic Reforms and Democracy

Evidence of a J-Curve in Latin America

University of California at Berkeley

Simeon Nichter

University of California at Berkeley

This article explores the relationship between economic reforms and democracy in Latin America between 1970 and 1995. Existing theories suggest divergent effects across time horizons. The implementation of reforms— economic liberalization—may initially destabilize democracy due to popular backlash or overzealous reformers' usurpation of democratic institutions. However, the potential outcome of reforms—greater economic liberalism— may later foster or reinforce democracy by dispersing economic assets, making rulers more susceptible to international constraints, or demobilizing social groups that may otherwise make politically destabilizing redistributive demands. Time-series cross-section analyses using an error correction model provide evidence of this J-curve relationship. Although countries engaging in economic reforms may experience a temporary deterioration of democracy, they tend to become more democratic in the long run. Findings are robust to numerous control variables, country and time fixed effects, and specifications using either Polity IV or Freedom House democracy indicators.

Key Words: democracy • democratization • economic reform • J-curve • Latin America • liberalism • liberalization • neoliberal • regime change • transitions • third wave

This version was published on October 1, 2008

Comparative Political Studies, Vol. 41, No. 10, 1398-1426 (2008)
DOI: 10.1177/0010414007305811


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