Does election transparency influence economic growth?
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The Influence of Election Transparency on Economic Growth
Introduction
Election transparency is a critical factor in the governance of both developed and developing countries. It plays a significant role in shaping economic policies and outcomes. This article synthesizes research findings to explore how election transparency influences economic growth.
Fiscal Transparency and Economic Growth in Developed Democracies
Public Employment and Economic Growth
Research on OECD countries indicates that fiscal transparency significantly impacts the relationship between economic growth and public employment. Specifically, economic growth tends to increase public employment more in environments with low fiscal transparency, particularly during election years. This suggests that in less transparent fiscal environments, governments may use public employment as a tool to gain electoral favor, thereby linking economic growth with increased public sector jobs during election periods.
Moderating Effect of Fiscal Transparency
The same study highlights that higher fiscal transparency can mitigate the positive effect of economic growth on public employment. This implies that transparent fiscal policies may prevent the manipulation of public employment for electoral gains, leading to a more stable and predictable economic environment.
Transparency and Economic Growth in Developing Countries
Non-linear and Threshold Effects
In developing countries, the relationship between transparency and economic growth is more complex. Research utilizing panel generalized method of moments (GMM) and dynamic-panel threshold estimations reveals a U-shaped relationship between transparency and economic growth. This means that at low levels of transparency, economic growth may be hindered, but as transparency increases beyond a certain threshold, it significantly stimulates economic growth.
Role of Financial Development
Financial development plays a crucial role in this dynamic. In high-transparency regimes, financial development can further enhance the positive impact of transparency on economic growth. This suggests that developing countries with robust financial systems and high levels of transparency are better positioned to achieve sustainable economic growth.
Political Favoritism and Local Economic Growth
Evidence from India
A study focusing on India provides insights into how political favoritism, influenced by election outcomes, affects local economic growth. The research shows that areas represented by politicians from the ruling party experience higher private sector employment, increased share prices of firms, and greater economic output as measured by night lights. This indicates that political favoritism can lead to significant local economic benefits, although it may also introduce inefficiencies and inequalities in resource allocation.
Regulatory Influence
The same study suggests that politicians primarily influence firms through their control over the implementation of regulations. This regulatory control can create an environment conducive to economic growth in regions favored by the ruling party, further linking political dynamics with economic outcomes.
Conclusion
Election transparency plays a pivotal role in shaping economic growth. In developed democracies, higher fiscal transparency can stabilize the relationship between economic growth and public employment, reducing the potential for electoral manipulation. In developing countries, transparency has a non-linear impact on growth, with significant benefits observed in high-transparency regimes, especially when coupled with financial development. Additionally, political favoritism influenced by election outcomes can drive local economic growth, as evidenced by the case of India. Overall, enhancing election transparency can lead to more equitable and sustainable economic growth across different contexts.
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