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The rise of contract-intensive economic structures and democratic development: Are they related?

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  • Mousseau, Michael
  • Mousseau, Demet Yalcin

Abstract

Does the rise of contract-intensive economic structures in an economy affect political norms and promote democracy? In this study we delineate how the economic structures of commercial contracting can yield the interests, values, and outlooks that favor the democratic rule of law for the enforcement of contracts. Analyses of most countries from 1950 to 2019 show that the increase in the intensity of contract flows has a significant impact on democracy. The results are robust across a range of specifications, measures, control variables, and with instrumental variable regression to check for reverse causality. A change from the tenth to ninetieth percentile in the institutionalization of commercial contracting corresponds with a substantial 58 to 105% increase in local average treatment effect (LATE) on democracy in the long run, depending on the measures examined.

Suggested Citation

  • Mousseau, Michael & Mousseau, Demet Yalcin, 2023. "The rise of contract-intensive economic structures and democratic development: Are they related?," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 273-285.
    • Handle: RePEc:eee:streco:v:65:y:2023:i:c:p:273-285
    DOI: 10.1016/j.strueco.2023.02.017
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