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Young Democracies and Government Size: Evidence from South America

30 January 2013
Publication Type: Working Paper
JEL Code: H11, N16, O11, O54

We investigate in this paper the hypothesis that when democracies are young, or still fragile and unconsolidated, the size of government tends to increase, predictably in an attempt of redistribution, or to buy out the electorate, so that democracy becomes acceptable and “the only game in town”. For that we use a sample of all nine South American young democracies during the period between 1970 and 2007. The results, based on dynamic panel data analysis, suggest that the young democracies of South America have been indeed associated with bigger governments. Furthermore, we test for the hypothesis that the outgoing dictatorships of the day engaged in activities which would bequest the young democracies with big bills to be repaid at the initial stages of those new democratic regimes. This hypothesis is not con.rmed by the analysis conducted here. Finally, there is evidence that, as those democracies mature over the long run, the size of governments tends to decrease, or to return to a sort of long-run steady state. All in all, in times of a new wave of democratisation being experienced by some countries, the evidence presented here is rather informative of what to expect in terms of government size during political transitions.

Series title: Working paper 329
1 February 2018
Journal: Journal of Economic Policy Reform
22 February 2018
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