Economic and Political Liberalizations

Francesco Giavazzi, Guido Tabellini

NBER Working Paper No. 10657
Issued in July 2004
NBER Program(s):   IFM

This paper studies empirically the effects of and the interactions amongst economic and political liberalizations. Economic liberalizations are measured by a widely used indicator that captures the scope of the market in the economy, and in particular of policies towards freer international trade (cf. Sachs and Werner 1995, Wacziarg and Welch 2003). Political liberalizations correspond to the event of becoming a democracy. Using a difference-in-difference estimation, we ask what are the effects of liberalizations on economic performance, on macroeconomic policy and on structural policies. The main results concern the quantitative relevance of the feedback and interaction effects between the two kinds of reforms. First, we find positive feedback effects between economic and political reforms. The timing of events indicates that causality is more likely to run from political to economic liberalizations, rather than viceversa, but we cannot rule out feedback effects in both directions. Second, the sequence of reforms matters. Countries that first liberalize and then become democracies do much better than countries that pursue the opposite sequence, in almost all dimensions.

download in pdf format
   (540 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10657

Published: Giavazzi, Francesco and Guido Tabellini. "Economic And Political Liberalizations," Journal of Monetary Economics, 2005, v52(7,Oct), 1297-1330. citation courtesy of

Users who downloaded this paper also downloaded* these:
Eichengreen w12450 Democracy and Globalization
Persson and Tabellini w11993 Democracy and Development: The Devil in the Details
Berger, Easterly, Nunn, and Satyanath w15981 Commercial Imperialism? Political Influence and Trade During the Cold War
Rodrik, Subramanian, and Trebbi w9305 Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development
Duflo, Dupas, and Kremer w14475 Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us