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Democracy and fiscal-policy response to COVID-19

Author

Listed:
  • Sezer Yasar

    (Cardiff University)

  • Ceyhun Elgin

    (Bogazici University
    American University in Bulgaria)

Abstract

In this paper, we investigate the relationship between the level of democracy and fiscal-policy response to the economic crisis induced by the COVID-19 pandemic. We use a novel cross-country panel dataset of fiscal-policy responses with time variation. Our results suggest that more democratic countries adopted substantially larger fiscal-policy packages (in % GDP), and the gap regarding the size of packages between more democratic and less democratic countries widened over time. Our analysis of the components of fiscal policy shows that democracies, in particular, provide larger packages that benefit the broad public. Furthermore, our system-equations estimations suggest that the relation of democracy level with the fiscal-policy response is established through democracy’s relation with inclusive institutions, represented by the parliamentary system, and corruption.

Suggested Citation

  • Sezer Yasar & Ceyhun Elgin, 2024. "Democracy and fiscal-policy response to COVID-19," Public Choice, Springer, vol. 198(1), pages 25-45, January.
    • Handle: RePEc:kap:pubcho:v:198:y:2024:i:1:d:10.1007_s11127-023-01107-3
    DOI: 10.1007/s11127-023-01107-3
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    Cited by:

    1. Ceyhun Elgin & Colin C. Williams & Gamze Oz‐Yalaman & Abdullan Yalaman, 2022. "Fiscal stimulus packages to COVID‐19: The role of informality," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(4), pages 861-879, May.

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    More about this item

    Keywords

    COVID-19; Democracy; Fiscal policy; Parliamentary System; Corruption; Pandemic;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other

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