Democracy and fiscal-policy response to COVID-19

Yasar, Sezer and Elgin, Ceyhun 2024. Democracy and fiscal-policy response to COVID-19. Public Choice 198 (1-2) , pp. 25-45. 10.1007/s11127-023-01107-3

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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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Springer
ISSN:	0048-5829
Funders:	NA
Date of First Compliant Deposit:	29 September 2023
Date of Acceptance:	18 August 2023
Last Modified:	06 Mar 2024 10:54
URI:	https://orca.cardiff.ac.uk/id/eprint/162830

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