Testing the Political Replacement Effect: A Panel Data Analysis

Authors


  • We are very grateful to Daron Acemoglu, Alessandra Casella, Ram Mudambi and James Robinson for their valuable comments. The article also benefited from the constructive suggestions from Jonathan Temple. Early versions of this study have been presented at the American Public Choice Society Meetings in New Orleans and Baltimore, the European Public Choice Society Meeting in Berlin, the World Public Choice Society in Amsterdam, the Association for Public Economic Theory in Seoul, and the Silvaplana Workshop in Political Economy. We acknowledge the comments of conference participants and discussants, especially Jacob de Haan, Martin Paldam, and Hans Pitlik. The usual disclaimer applies.

Abstract

This article tests for the existence of the political replacement effect, as suggested by Acemoglu and Robinson: [American Political Science Review, Vol. 100, pp. 115–131]. They argue that the implementation of market-oriented reform is crucially driven by the political calculus of incumbent governments: they implement economic policy change if such a choice is not expected to reduce their chances to retain power. This implies a non-monotonic relationship between the level of political competition and the extent of economic reform. We test this hypothesis using data for 102 countries over the period 1980 to 2005. Our results strongly support the theory.

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