Existing studies of public support for economic reforms have focused almost exclusively on the impact of individual-level factors (e.g. Duch 1993; Gibson 1996; it is democracy and good governance that drive a wedge between the preferences for economic reforms of those with high Our primary focus is on skills relevant to a market economy based on the idea that higher levels of market skills are associated with greater returns to economic reforms and therefore more vigorous support for reforms.
Yet, little is known about whether the impact of market skills on support for economic reforms depends on the institutional environment. Theoretically, good institutions can complement or replace private returns from economic reforms. Given the greater returns to market skills that flow from economic reforms under good institutions, the highly educated will be stronger advocates of market reforms than the less educated.
Thus, there is probably little difference in the assessment of economic reforms between high- and low-educated respondents. According to the complementarity view, democracy and strong governance institutions drive a wedge between the preferences of people with high and low market skills regarding economic reforms. Our focus is on whether the impact of market skills on support for economic reforms depends on the level of democracy and the quality of governance.
Empirical Methodology
The rest of the notation and assumptions about the variance-covariance matrix are unchanged. In contrast, if and have the opposite sign of the direct effect of market skills (ie, are positive), then skills and institutions are substitutes. We also examined the direct effect and the interaction with market skills of the following potentially important variables at the national level: inequality, growth, type and mode of privatization (eg, insider vs. outsider; voucher vs. direct sale), years since privatization.
The estimates of the national-level variables are weighted according to the accuracy of the first-level estimates (Borjas and Sueyoshi 1994). Both GLLAMM and the two-stage method take into account that we only have 27 country-level observations of the institutional environment. There are a number of reasons to believe that the level of democracy and the quality of governance institutions are endogenous to public support for market reforms in general and privatization in particular.19 Most importantly, important omitted variables, such as the quality and timing of the reforms themselves, are probably correlated with both the quality of the institutional environment and public support for reforms.
Under this assumption, we can thus estimate the difference-in-differences effect of the interaction between market skills and institutions without bias by comparing the difference in support for market reforms between groups with low and high market skills in good and bad institutional sectors. environments. The first two columns present coefficients and marginal effects of the interaction terms between measures of market skills and institutions from the probit estimates with country fixed effects (i.e. Equation 2). The top panel of the table presents the results for democracy; and the bottom panel for governance settings.
In columns 3 and 4, we report results from a probit estimation without country fixed effects, but with the direct effect of the relevant institution included and clustered by country (ie, Equation 3). Again, we see that the difference in the rate of support for revision of privatization between non-professionals and professionals and between non-entrepreneurs and entrepreneurs increases with the quality of the regulatory environment. At the level of legislative quality in Georgia, becoming an entrepreneur reduces support for privatization revision by about 5 percentage points, but at the level of legislative quality in the Slovak Republic, this decrease is about 12 percentage points.
Because the effect estimates of the national-level variables in the two-level method are not invariant to the scaling of the individual-level variables, we show the results for the average respondent and for a 40-year-old female respondent. from the 5th income decile (columns 1 and 2 of table 3). Each of our four measures of democracy and governance significantly reduces the level of support for a privatization review for a 40-year-old woman; and this also applies to the average respondent, with the exception of the insignificant influence of the democracy index. 24 These estimates of direct effects are consistent with the results of other evaluation procedures, i.e. GLLAMM and probit reported in Table 2 and Table A3.
Here the only difference from other reported results is that in the probit estimates the coefficients of the direct effects of the.
Robustness Checks
We also investigated whether institutions interact with other commonly used measures of human capital: education, age (as a proxy for experience), and health. These results show that measures of human capital based on age and education are poor indicators of relevant market skills in transition countries. We further verified the robustness of our results by restricting the age of respondents to 60 and under to ensure that our results are not driven by the views of the retired population.
Because we have few second-level observations, we are somewhat limited in the number of independent variables we can include in our estimates. Nevertheless, we also added variables for 1999-2006 GDP growth and current levels of inequality to our estimates, but these variables were not significantly related to support for privatization revision and did not affect our main results. Although our results do not show that the impact of market skill on reform support depends on economic inequality, this result may be specific to post-communist cases.
Where economic inequality is on average higher, as in Latin America, the incentives for politicians to redistribute the benefits of reform to the highly skilled may be stronger because the average voter is more likely to be skilled. low (Meltzer and Richards 1981). We also examined whether the type of privatization (coupon vs. non-coupon) or method of privatization (sale vs. donation) affected support for privatization review directly and through interaction with market capabilities. These variables were generally unrelated to support for privatization review and did not change ours.
However, it is difficult to capture the type or method of privatization with a single measure, and these measures are likely to be noisy. We also repeated our analysis using interactions of our national-level variables with only one of the two measures of marketability simultaneously in separate estimates. In addition, we used a weighting scheme for summary statistics to account for the fact that the LiTS data may be somewhat biased towards older respondents and women due to non-response, although the sample was originally drawn to be representative.
In the basic regressions we do not apply this weighting scheme, but instead introduce controls for age and gender. The results are also robust: they drop the two most authoritarian countries – Uzbekistan and Belarus – from the sample and use the most recent values for the institutional indicators instead of the averages over time.
Conclusion
Our findings indicate that theories of the politics of economic reform may benefit from a consideration of how the institutional environment influences individual preferences over policy. Most works implicitly assume that groups benefiting from or poised to benefit from economic reforms will support economic reforms regardless of the institutional setting, but our results indicate that preferences over economic policy are conditioned by the quality of the democracy and governance. That the impact of market skills depends on the institutional environment suggests that theories of the politics of economic reforms that rely on those with more market-relevant skills to push for economic reforms may have limited relevance under autocracy and in weak institutional environments.
Whether these results extend to policies beyond economic reform or to other regions of the world is an open question, but analyzing how skills and institutions interact to shape support for policy change is an important agenda for future research. Note: Weights applied to ensure that the population as a whole is represented, taking into account the age and gender distribution of the population in each country (see EBRD 2007a: 6). The magnitudes of the SE indicate that if a difference between any two countries exceeds 3 percentage points, it is statistically significant.
Executive control The extent of institutionalized constraints on executive decision-making authority. Government efficiency Government efficiency represents the quality of public services, the quality of the public service and its degree of independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to this policy. Control of corruption Control of corruption represents the extent to which public power is exercised for private gain, including both petty and grand forms of corruption and the "capture" of the state by elites and private interests.
Regulatory quality Regulatory quality represents the government's ability to formulate and implement sound policies and regulations that allow and promote private sector development. Number of jobs for respondents who worked for pay (for an employer) in any of the years from 1989 to 2006. Another job is defined by another position working for the same employer, by a change in the ownership type of the business. and when changing employers.
Number of years the respondent worked for wages in the state sector (ie the state owned the company). Number of years the respondent worked for wages in the private sector (ie the owner of the business was a private person). Unemployment, 2006 Dummy is equal to the value 1 if the respondent is actively looking for a job at the time of the survey.
Note: For the summary statistics of variables at the individual level, we apply weights to ensure that the population as a whole is represented, taking into account the age and gender distribution of the population in each country (see EBRD 2007a: . 6).
