CHAPTER 36 THE POOR PERFORMANCE OF POOR DEMOCRACIES PHILIP KEEFER constituencies by redistributing fom th However, in poor democracies, not only is redistribution particularly low, but corruption is ly high, suggesting non-elite constituencies have at for performance. on political market imperfections as an avers mnship between regime type and economic performan specifically, why poor democracies perform so much differently than. richer jcracies. Political markets are vulnerable to imperfections because citizens must ‘on promises in deciding which political competitor to support. When compliance ‘with promises cannot be observed, or where no sanctions are available to punish compliance, politicians are unable to exchange promises for votes and political ies of democracy and development generally oliticians can make credible promises to non-elite sources of regime performance, is not meant to nplay the potential role of external constraints on government performance. Such thy countries place on the movement of and especially out of poor countries, as wel as external to national security. However, there is litle evidence that these systematically ‘explain the differences between poor and rich democracies nor that the policy choices of democracies identified below are the optimal response to these. 1 Poor CounTRigs AND THEIR POLICIES standing the sources of policy heterogeneity across countries isan essential building ofa broader understanding of democracy, political economy, and development. section offers ample evidence of heterogeneity in the choices of rich and poor Sountries and of poor democracies and non-democracies on a wide array of policy imensions. Most of these have been linked to economic growth, including the macro- ation. Though }one ofthem commands universal support as an explanation for economic development, ‘Be one disputes that underperformance on al of them substantially hinders development Progress. Consistent with this, poorer countries make significantly different choices ‘long these policy dimensiéns than richer countries; these are not easily explained by _Teeime type. However, consistent with the ambiguous effets of democracy on growth, the Policy choices of poor democracies differ little from those of poor non-democracies (Mabie 36.1.1 The Washington Consensus: Macroeconomic Policies and State Ownership Median consumer Price infiation, 1985 ‘Median consumer price infiation, 8, 2000, ‘Mean government ebt/ODP, 9, 1998, Days in customs Days to enforce @ contract Paved roads/total roads, 1998 Corruption (0-6, east corupt=6), 1997 Bureaucratic quality (0-6, 6=highest For most ofthe 1980s and into the 1990s, the bundle of policies various t0 2000, but agai ed i . variously chara nut again, remained approximately 25 percent higher in poorer countries as the Washington or “neo-liberal” Consensus was the main aoe a growth, While the connection between these policies and growth is not accepted, although both poorer and richer countries largely embraced the Cor during the 1990s, a substantial policy gap remained between the two gro countries at the end of the 199052 "4 Compared to 1985, when trade volumes in rich and poor countries were 8; percent, respectively, trade volumes in 2000 were approximately 25 percent both sets of countries? The gap in trade volumes grew slightly: by 2000, exp. ‘able 36. Poor democracies act like poor non-democracies pe mports of goods and services equaled 100 percent of GDP in the 68 countries with preter than $5985 ppp-adjusted per capita income and only 81 percent in the 68 gountries with lower incomes Median inflation also dropped in all countries from ja2000, Among the 62 countries with data in 2000, median government debt was 39 percent of GDP forthe richer st countries. Median government debt was much highes, fs percent of GDB, for the poorer 31 countries, a substantial increase from the 45 percent of GDP that poorer countries exhibited in 1985. Regime type seems not to have had a systematic influence on reform choices, articularly between poor democracies and non-democracies. No inflation difference evident between poorer democracies and non-democracies in 2000; among poorer countries, regime type and trade volumes are uncorrelated in both 1985 and tooo. Only with indebtedness does democracy make a difference across the board: at last in 2000, democracies, including poorer democracies, were significantly less Poor non- Poor r indebted than non-democracies. democracies (no) democracies (n0) ich democrat 9.41 (40), 4.2. Regulation “After the Washington Consensus, policy advice turned to second generation reforms, those aimed at distortions in the regulatory environment. Again, there is no consensus ‘onthe magnitude of regulatory effects on growth and whether the costs of regulation “are outweighed by broader social benefits. However, holding aside important issues ‘egarding the quality of growth (eg. variations across countries in the environmental consequences of growth), there is no dispute that regulation can limit firm incentives “to invest and, as a consequence, economic growth. Poor countries appear to have a stvikingly different regulatory posture than rich countries and poor democracies, if 391 (38) 4312) m3 (14) 532 (16) 25 ( 23 (21) 39.8 (34) 45705) anything, erect more stringent regulatory barriers than all other countries. 2 Data from World Development Indicators, taken from the World Bank Doing " Business program (2004) and World Bank Investment Climate surveys (various dates, 448 (11) 389 (14) 2001-2004), confirm this with three indicators. Customs delays are 6:3 days in 32 poorer i mntract enforcement requires 377 days in 68 a zd Poorer countries, compared to 294 in 60 richer countries; and the median time to resolve ei) sae 5 An insolvency is3.6 years among 64 poorer countries, but only two years among 60 richer ones, More clearly than with macroeconomic outcomes such as inflation and trade Saen) flows, these regulatory variables are more completely within the control of governments nd provide a clearer indication of differences in the decisions of rich and poor country Governments. One might argue that poor countries cannot afford the administrative Apparatus needed to regulate efficiently. This is not convincing, however: there is no Telationship between income and regulatory performance for countries with incomes _ Per capita ranging from $500 to $10,000 (75 percent of the total). 3.7 (28) rage considerably depending on which trade policy ot index of trade polices oneEngerman and Sokoloff (2003) find in nineteenth-century Latin Ametica that eg. at coun. tries with competitive elections would have fewer bai rer barriers to entry and be somewhat out 10 Percent fewer day rte regard to contract enforce. ‘ent and bankruptcy and are actully associated with longer customs delays -3 The Size of Government and Redistribution The redistributive role of government is at the core of th 3 literature ase dlationship between democratic i — tutions and nd Limong 353) arge that elections may make ais fa tee eee ribute income from the rich, lowering returns to investment and slowing grata although they make the contaryangument and contend that dence sec ze positively associated, Acemoglu and Robinson (2006) also give cental attentng o redistribution and the security of property rights. “ There is, however, litle evidence that poor countries, democratic or not, engage in 2ore retributive activity. The ot sizeof goveramentis oe proxy for relisaibucal nd is notoriously small among poor countries. In 1998, 84 countries had deta on onsolidated central government expenditures. For the 42 poorer countries in this roup, median expenditures were 24 percent of GDP; forthe other 42 countries, median xpenditures were a fall efght percentage points higher One potential source of >distribution is social security; 64 countries have data on social security taxes in 1998 or the 32 poorest countries inthe group, the median ofthe total social security tanes 2aid by workers and employers) was zero. For the 32 countries with pop-adjusted pet apita incomes greater than $6,635, the median was six percentage points of GDP. The association of democracy and redistribution isa subtle one. Boix (2003) and ‘cemoglu and Robinson (2006) argue that political and economic elites do not even armit democratization if they expect substantial redistribution. It is less surprising, serefore, that competitive elections are uncorrelated with goverment spending across 1 countries. Boix (2003) further argues that citizen demand for intergenerational ansfers and unemployment payments should inrease with country income, but that lyin democracies should this demand become policy. Consistent with this, he finds lat the interaction of democra Sens of democracy and log of income per capita is significant and positive > Others argue that ight pose graver ch tack 2002; Svensson 1898) ‘The median ppp-adjusted per capita income of ‘This result depends onthe tcl instability and opportunistic behavior by, iste governments, both of which io development, might actually be sribution (Keefer and impton (suring rhcry, an arglly mote abuso consoling forced ears clections have for per capita income, poor countries with competitive elections spend at least five percentage points of GDP less than non-democratic poor countries. Even if one ‘ipulates that demand for redistributive spending shifts sharply with income ‘Among poorer countries, however, and inconsistent with these theories, competitive large negative effect on government spending. Controlling or not and that elites do not permit democratization when they expect high levels of redis- tribution, it is surprising that poor democracies spend substantially less than poor snon-democracies Poor countries also tax less and differently. Consistent with the arguments in Boix (2003), in 1998—when data on more than eighty countries are available—the median poor country collected total revenues amounting to 38 percent of GDP; among richer countries, the median collected 31 percent of GDP. Again, however, poor democracies collected 3.6 percent of GDP less in total revenues than poor non-democracies. Poorer countries relied significantly less on income and social security taxes and much more on non-tax revenues (2 percent of GDP in the median richer country, 3 percent in the median poorer country). However, poor democracies collected almost two percentage points of GDP less in income taxes than poor non-democracies. Dozens of articles have examined Wagner’s law, that citizens of richer countries demand larger government, to explain why poor countries have smaller govern “However, Wagner's law does not explain why total government spending and redistribution are insensitive to regime type—why, as the evidence here and in Malligan, Gil, and Sala-i-Martin (2004) seems to suggest, poor democracies actually spend less than non-democracies. This phenomenon is a challenge for theories of democracy and development that is discussed further below. 1.4 Public Goods and the Composition of Government Spending Scholars argue that policy choices regarding both human capital and infrastructure play a significant role/in the growth process (see, for example, Easterly and Servén 2004). The provision of these is substantially worse in poor countries. Median gross secondary school enrollment in 1998 was 54 percentage points lower in the 59 poorer countries for which data is available than in the 59 richer countries. In 2000, 20.9 percent of the population had access to electricity in the median poorer country; 92.9 percent had access in the median richer country, The median fraction of all roads that were paved among the 69 countries with ppp-adjusted per capita incomes greater than $4,626 was .69 in 1999. It was only .2 in the 70 countries poorer than this.* © IF one restricts the comparison to the forty-nine countries with information on beth public investment and paved roads, £5% of roads are paved in the median richer county, only 3st in the ‘median poorer countryIncome does not explain lower levels of provision in poor countries. In contrast tp As Stasavage (2003) do security emerged in those years when English merchants exercised veto power in the p ‘were irrelevant to social policies, the effort made to change and defend institutions— ‘measured not least in blood and money—is hard to explain, Since the 1990s, the literature has emphasized two other possible explanations for the lack of association between democracy and growth, beyond the offsetting effects of sreater security and greater redistribution. One is data: noisy measures of democracy would also mask any significant association of democracy and growth, Ambiguity Persists, though, with more precise measures of democracy. The second is conceptual, recognizing that democracy is not an exogenously given characteristic of countries, Only when we take into consideration the conditions under which societies choose democracy can we make firm conclusions about whether democracy affects growth, While offering a well-documented explanation for the ambiguity of the democracy-_ growth relationship, this approach does not satisfactorily explain the differential performance of poor and rich democracies. 21 Data, Democracy, and Development Early researchers looking at democracy and growth relied primarily on Freedom House (Gastil 1988) for its political freedoms and civil liberties indicators, and on Banks (1972) or the 190), based on expert assessments of whether the executive in a country was constrained, political partici- Pation was open, etc. (see Bollen 1993 for a discussion). The use of these indicators has confronted two problems ey already embed assessments of regime performance in their coding, inherent problem of endogeneity: ies where evaluators judge the case with Freedom House i jaggers, and Moore (1990) Polity measures of sm, though not free of it. For wocracy and growth focus on the formal institutions of democracy, the use of Polity data gives rise to problems of interpretation and endogeneity. ‘ond difficulty is the lack of clarity regarding the weights given to different (competitive elections versus political checks and balances), In Polity IV, for example, researchers cannot ascertain the weight given to competitive elections in determining whether political participation is open, one criterion for democracy in Polity IV; or whether executive constraints are fixed by institutional checks and balances or by less formal limitations on executive discretion. In response to these difficulties, Beck et al. (2001), in the Database of Political ns, separately code the competitiveness of legislative and executive elections jective criteria (whether many parties compete, with no single party or candidate getting more than 75 percent of the vote). Using these data, beginning of h usingperiod competitive elections explain growth in a 1975-2000 cross-section in Keefer (2004), but only after controling for endogeneity. Praeworski etal (2000) assembl data beginning in 1950 that characterize countries as democratic based on equally transparent criteria: leaders are competitively elected and have changed at least once (Boix and Rosato 2001 have extended this variable back to 1800). However, estimating the effects ina panel with country and year variation since 1950, they continue to fing that democracies do not grow fester. Apparently, and anticlimactically, more accurat data does not seem to unravel the puzzle of democratic underperformance, _ 2.2 History, Democracy, and Growth Acemoglu, Johnson, and Robinson (2002) and Boix (2003) explain the opaque relationship between democracy and growth by arguing that democracy is chosen only when the decisive actors believe it will make them tum, on their expect ions about the effects of redistribution under democra ‘These expectation ae shaped by the inability of actors to make credible agreement ding fature redistribution. In Acemoglu, Johnson, and Robinson (2002), elites government and economy and confront a double-edged cre hey cannot credibly promise to refrain from expropy erefore do not invest and growth is slow. However, elites reap large income gains if they could offer non-elites democracy and secure property rights in exchange for a credible promise from non-elites to assign elites a sufficiently high share ofthe resulting income gains. However, a second credibility wedge undermines this contract: the disenfranchised cannot credibly promise to refrain from massive redistribution once they take power. Elites therefore only accept democratization when the rents they earn under the status quo are sufficiently low that the costs of redistribution are low. Under these circumstances, we should observe democracy, secure property rights, an i topes When ste coulis crave owes we theldcheenenecet ice This logic actualy deepens the puzzle of why growth and democracy are not strongly related, since it predicts that democracies should always grow faster. In complementary analyses, though, Acemoglu and Robinson (2001) and Rosendosf (2001) allow non-eltes to threaten revolution. Under these circumstances, elites sometimes concede to political openness even when they would prefer not to. If inequality is low, this leads to the earlier outcome of democracy and growth. If inequality is moderately high, their concession leads to political instability and low srowth, Redistribution in such democracies is high enough that it triggers polit instability as elites rise up to engage in counter-revolutions, Here, democracy and growth do not necessarily go together and regime type osellates. ‘These arguments imply that prior efforts to examine the effect of democracy on srovth were biased towards finding no effect by not taking into account the conditions under which elites permit democracy in the fist place. The problem is not, asin Preeworski and Limongi (1993) and many others, that redistribution offsets the security of property rights under democracy, but rather that some democracies are accepted ‘more willingly by elites than others. In those that are not, revolution and counter- ‘evolution, politcal instability and relatively high rates of redistribution are observed. If cone conflates the two types of democracies, one naturally biases downwards the estimated effect of democracy on growth. ‘Estimations in Acemoglu, Johnson, and Robinson (2002) account for the two types of democratization empirically. Fist, they examine former colonies, countries where elites, backed up by a colonial power, were most likely to control democratization and where ‘democratization was therefore largely a function of elite rents rather than of revolutionary threats from non-clites. Second, they directly control for elite rents (which discourage democratization) using settler mortality. Settlers migrate to countries where mortality is high only if rents are sufficient to offset the high risk of death. These settlers had litle incentive to develop institutions that would open up political and economic participation. "They find that settler mortality explains the relationship between income and democracy, “as one would expect if all three variables move together (Acemoglu et al. 2005). Engerman and Sokoloff (2002) make similar arguments and offer more direct evidence of the actions that elites took to protect their rents, finding that those Latin ‘American countries with conditions most favorable to mining and plantation agri- culture were slowest to enfranchisé voters and to offer public education. These same countries were aggressive in adopting regulations that restricted entry of the non- clite into various economic activities. Their evidence is critical in making the case that democracy, property rights, and growth should all go together and are bound together by historical circumstance. 23 Equality, Distribution, and Unsuccessful Democracies: ‘Anomalies in the Late ‘Twentieth Century ‘The foregoing arguments, while successful in linking theoretically and empirically historical factors to the current growth experience of democracies, have a number of other implications that are not well supported in the data. In particular, the central ‘theoretical explanation for the poor performance of democracies in this literature is high redistribution and political instability, rooted in inequality. However, the bulk of (imperfect) evidence does not indicate that poor democracies exhibit greater and high levels of redistribution. , poor democracies do exhibit greater instability, consistent with the erature, In their table 27, Przeworski, et al. (2000) show thirty transitions away from democracy from1950 to 1990, of which twenty-six were in poor democracies. Evidence from the Database of Political Institutions is similar. The poorer half of all countries that had competitive elections in 980 experienced thirteen transitions out of democracy over the succeeding twenty years; the richer half only one. However, redis- tribution from the rich elite to the poorer non-dlites does not seem to drive this instability. On the contrary, the earlier evidence suggests that poor democracies havesmaller governments and or rich countries. engage in ess redistribution than either ‘on than either poor non-democrag icators, are post-redistribution. Since richer democracies redis- » itis possible that poor and rich democracies have similar market nequality. The correct inequality data may tell us that successful democracies are more ‘unequal than unsuccessful democracies. Nevertheless, the absence of an obvious association among low income per capita, democracy, inequality, redistribution, and political instability motivates a search for additional explanations of the policy choices and growth record of poor democracies.” left-leaning governments. However, in fe i in fewer than half the cases (sixteen) governments in power in the year after transition, in only o transition from ale toa right wing government bot neng ce es ‘rantions are coded as being fom left-wing z sith insabity, meaaed Inequality (Gini coefficients) differences across regim: consistent with the theory: poorer democracies : menu thn richer denociats However, mesued mequaly foc a pker for Points higher) among countries that have ever experienced rege ch pared to those that have never experienced it, and even this difference dissprens among Poorer countries, In addition, Milanovic (2000) reminds us that social Geary ver redistribution is driven by markt inequality income inequality net of anne redistribution, and that pre- and post-redistributi rebel ion Ginis can differ substantial ‘equality measures in cros-country databases, such asthe Gini indicators trom the 3 PoLiTicaAL MARKET IMPERFECTIONS AND HETEROGENEOUS DEMOCRATIC PERFORMANCE butin ten ens (nt reprise wing governments If inequality and the struggle over redistribution do not fully explain the performance differences observed among democracies and the lack of impact of democratic institu- tions on outcomes in poor countries, what else might? A useful starting point is the observation made earlier, that policy distortions generally benefit narrow interests at the expense of broad socal interests. The resources for education and public investment that do not translate into better learning or infrastructure nevertheless do flow to the benefit, of recipients of patronage appointments in education ministries or to well-connected contractors. Cronies can circumvent bureaucratic obstacles that obstruct the average entrepreneur and ensure that their contracts are enforced (and their contract violations Table 36.2 Ideology and regime change, 975-2004 Se Tem nd ere reales ‘An ample literature, an emphasis on democracies. The fi focused on the role of (i981, 1983) documents sin explaining heterogeneity in the performance of evidence of the role of domestic politics in development 1975-2004 oe agricul some African countries, To right istics of ups influenced country responses From left the economic interests of congressional district is a staple methodology of the American From right politics empirical literature. The question for the democracy and development literature Left ta right is why some democracies are more permeable to special interests (elites) than others. Right to let 7and imperfect citizen information. Where voters cannot observe politial act affect them, or where they cannot believe the promises of political cepcirs eal competition is les fcacous, and posibly useles, in preventing policies fc catering policies exclusively to the benefit of narrow interests or therscives ‘The inability of lite and non-elite politicians to make eedible commitments to other isthe fulcrum of the democracy and development ltetute. This Heat assumes away other Key imperfections, however: elite and non-lte pl a snake credible promises to members ofthe elite and non-elite respectively, whe yy can perfectly observe the actions that “their” politicians take and how there eget affect their welfare. The quality of pubicpolicyin poor democracies—lite beta ta oF worse than, the quality of policy in poor non-democracies—cals into question che valdty ofthis later assumption: non-lites seem entirely uneble to domand hee performance from non-elte politicians 7 More generally, conveying credible promises, getting credit for constituent servic, and mobilizing voters are challenges that var significantly in difficulty across countne Bringing the nuts and bots of political competition into the poltial economy of development offers a useful avenue for explaining why many democracies do root and, potentially, why some autocracies do well, ians can 31 The Policy Consequences of Low Pre-electoral (-selectoral) Credibility The power of political credibility to explain heterogeneous policy choices acro democracies, and the similarity of the policy choices of non democeave nod com cratic poor countries, depends on how one believes that citizens and politicians react to the absence of political credibility. The literature offers three p. and voters can do nothing to resolve the problem of eredibilit coordinate on ex post performance thresholds to discipline non-credible politic OF politicians can actually invest in and influence their credibility. The first two have ture. The last, the subject of work by Keefer and the lack of political credibility is a problem not ians who, unable to make credible promises to for their candidacies 3.4 The Consequences of Non-credibility when Politicians and Citizens are Helpless to Affect it TEneither citizens nor politicians can do anything about the lack of political credibility, ren filly enfranchised citizen have no leverage over political deckionmaters, Since their political competitors cannot credibly promise to do better, incumbent politi cians are essentially immune from challenge, Political promise, including those 10 redistribute income and assets, are therefore irrelevant. Stark policy predictions emerge from this view of pre-electoral credibility: governments exhibit entirely expropriatory behavior, taxing as much as possible and diverting all of the proceeds to private purposes. ‘As rocky as the policy landscape is in poor countries, and as plausible the claim that political competitors are not credible to voters in many democracies, it is nevertheless rare to find elected governments that are entirely insensitive to the demands of voters, “Money spent on education results in some student learnings most government revenues do not end up in the Swiss bank accounts of politicians. The assumption that politicians and voters can do nothing about the credibility problem is clearly too extreme. 3.2. The Consequences of Non-credibility when Citizens can Coordinate on Voting Rules 1986) suggests that voters coordinate on performance thresholds. If incumbents fail to meet the threshold, voters replace them regardless of who the challenger is (since challengers are non-credible, anyway). When voters are successful in this effort, governments engage in less rent seeking, Persson and Tabellini (2000) extend the Ferejohn model to demonstrate how these ex post voting rules influence the provision of public and private goods. In all cases, though they improve citizen welfare, ex post voting rules have Telatively modest effects on electoral accountability. ‘The conditions under which ex post voting rules can be implemented are strin- gent, particularly the requirement that voters coordinate on a performance thresh- ‘old. Keefer (forthcoming) argues, for example, that voter coordination is easiest when policy failure is quickly manifested and voter perceptions of the consequences, of failure are homogeneous. However, for other policies with more subtle effects, such as education, elections impose less stringent performance requirements on politicians. Hence, it is not surprising that poor democracies, where voters are ‘more reliant on ex post voting rules, exhibit no better education outcomes than poor non-democracies. On the other hand, in the case of banking regulation, the results of policy failure—financial crisis—are observed by all voters in a short, period of time, allowing for easier coordination of performance thresholds. Consist- ent with the greater efficacy of ex post voting rules under these circumstances, fiscal transfers to insolvent banks are substantially less in countries that exhibit competitive elections. However, the policy differences between richer and poorer countries cannot be ‘explained by the conjecture that poorer countries are more reliant on ex post account- ability rules. In countries in which these rules are the main device to discipline politi- cians, Persson and Tabellini (2000) conclude that rent seeking or corruption should be high, public good provision should be mediocre (but positive), but that transfers to narrow groups of voters should be zero. The policy record of poor democracies is ‘specially at odds with this last prediction. On the contrary, transfers to specific groups of voters dominate electoral competition in poorly performing democracies, as one can see from the intensity of spending on wages and public investment (pork barrel). Direct observation of political behavior in poor democracies i similarly inconsistent with the prediction that delivering goods to narrow groups of voters is unimportant in Ferejohn,Jow-credibility countri Braton and v7 democratized Africa een Walle (1997) characterize Precisely to capture the in vision of goods to nargo, Pakistani National Assembly fee thatthe job ofan MNa mat ole day” (1999, 19 our area, People vote for me Who can help them” (1999, 204). 34,3 The Consequences of Non-credibil ee tes of Non-credibility when Credibility ig Given the large electoral gains that 1 acquisition of credibii dno inves in thi ered pursue, however, their promises. Broups relative to public goods that benefit al citizens 4 Ample indirect evidence supports the argument that politicians in poorer to mae broxly credible promises to citizens. ite. Conint wh thi the Dasa of Rea ne records whether counties canbe ata as none of these care rie competiti deviation less than the 92 percent in forty-eight richer count the presence of programmatic expect that older have had more opportunity to develop policy Matations regarding redistribution. One indirect way to capture policy reputation ‘age of a political party. DPI figures indicate that the average number of years sea party has existed under its current name in rich democracies is twice that in pore, forty-seven Years versus twenty-three. reno de Mesquita et al. (2003) recognize, as well, that limits to credibility drive olicy distortions. Their approach is the converse of the one in Keefer and Vlaica jowever. They allow both incumbents and challengers to credibly promise a sm of taxes and public goods to all voters, but allow politicians to make ible promises of private transfers only to groups with whom they have an i sumbent advantage and a bias towards these voters). Robinson and ‘Torvik .) make the more plausible assumption, in a developing country context, that no oliticians can make credible promises to voters. However, they also assume an subset of voters, again giving rise to policy distortions. While affinity matters in many settings, such as ethnically charged electoral less easy to ascribe broad differences in policy performance between ‘and poor countries to cross-country variation in these affinities. At the same (2005) argue, many of the strategies that politicians use to lize support are related precisely to the objective of improving the credibility of eir promises to voters. Relaxing the assumption that political credibility is exogenous mnecessary both to incorporate these political activities into the analysis of political spetition and to generate policy predictions that are more fully consistent with served outcomes. 4 CREDIBILITY, DEMOCRATIZATION, AND THE ROLE oF HisToRY The evidence is persuasive that politicians in poor democracies are less able to make ‘broadly credible promises. The policies they pursue are also consistent with a particular “Response to the lack of credibility: appeals to patrons and to narrow groups of voters. The credibility arguments are not only relevant to economic development, however, but also to political development and democratization. On the one hand, politicians in ing, democracies are on average less able to make broadly credible promises to the democratization process. However, new democracies endowed lower targeted good provision, an With broadly credible political competitors or social structures that make political and parties in poor democracies are less Ppeals to patrons relatively costly are likely to have an advantage. igher non-targeted good provisi cly to be programmatic. Second, onee Tue OTHER Pouiricar Marker ! FECTION: INcompiete Inrormaty, os —— a a g literature identifies si signi gitizen information, the other key p isussion inthis esay goes shor wr howone ways, however, ince the Key effect of shrift. In many their promises, Absent verifiabi formed voters distorts political deci cians expend resources to sway unin! interests in the process (Grossman ignore uninformed voters and are less apt to extend a ‘newspapers is higher The connection betwe yn and the earlier od. Like all public to be restricted) If this is cess to information, pipes cra ® Stokes 200) aay co oie tes win vores bc Meas eves ber ore ove dat pain ctl Promises and pure plies that electoral consequences bens votes 8 CONCLUSION decades of research, the theme of democracy and economic development ins as important a topic of investigation as ever. The literature now has rich janations for why some countries democratize and others do not; why democracy js associated with rapid economic development in some countries and not in others; policy choices favor development in some democracies and not others—that is, shy non-elites often fail to benefit from the polices of elected governments. ‘The conclusion ofthis essay is that the problem of credible commitment is at the core of each of these advances, but the precise role of commitment differs. The democracy and development literature points to the inability of elites and non-clites to make credible agreements with each other in order to explain why some countries have successfully democratized, These same arguments do not explain as easily performance variation among democracies. Poorly performing democracies do not seem to exhibit ‘the inequality, redistributive tendencies, and conflict over redistribution between elites and non-elites that ths literature predicts. Other arguments, focusing on the credibility of promises from politicians to sup- porters (e.g, from the leaders of non-elites to the non-elite), can fill this gap: poor performance emerges in some democracies not because the conflict between elites and ron-elites is more difficult to resolve, but because political competitors are unable to make credible promises to voters in the first place. History matters for this story of democratization as well, since democracies differ significantly in the extent to which they enjoy a legacy of political competitors able to make credible policy commitments to voters, or of patrimonialism that makes politicians reluctant to build up broad credibility with voters. This in turn links back to the literature focused on elites and non-elites, since precisely when political competitors can make credible policy commitments that we expect non-elites to be able to act collectively to force elites to give up power, Better understanding these historical links between political credibility and successful democ- ratization is crucial to improving the success of contemporary efforts by wealthy democracies to deepen democratization among the world’s poor countries. REFERENCES Aceoaiy, D., and Rosinsox, J. A. 2006. Economic Origins of Dictatorship and Democracy ‘New York: Cambridge University Press. — 2001. A theory of political transitions. American Economic Review, 9x (4): 938-63 — Jounson, S,, and Rominson, J. 2002. Reversal of fortune: geography and institution ‘making of the modem world income distribution. Quarterly Journal of Econom 1231-94 7 and YARzp, P2005, Income and democracy. Mimeo, Department of Economics, ‘Massachusetts Insitute of Technology