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Forms of Democracies and Financial Development
Auteur(s) : MANDON [P] , MATHONNAT [C]
Abstract / Résumé : The political economy of finance literature emphasizes the critical role of political institutions in promoting financial development. Related empirical findings highlight a robust positive effect of democratic regimes on financial development compared to dictatorships. However, no study focused so far on identifying the precise political institutions explaining the financial development enhancing effect of democracies. In this paper, we study the effects of disaggregated political institutions on financial development along three institutional dimensions, namely forms of government, electoral rules and state forms. Using a large panel of 140 countries over 1984-2007, we show that institutional details are of crucial importance, since the positive effect of democracies on financial development clearly depends on the precise institutional dimensions at work, namely: parliamentary governments and, to a lesser extent federal states. Thus, our study contributes to the institutional design debate, by showing that the simple promotion of democratic regimes might not be sufficient to foster financial development.
Code JEL : D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior , G28 - Government Policy and Regulation , H00 - General , P48 - Political Economy - Legal Institutions - Property Rights - Natural Resources - Energy - Environment - Regional StudiesEtudes et documents :
- version antérieure [ 2014 ] Forms of Democracies and Financial Development