infonet-economy

This paper studies how the dynamics of democratization influence
the design of constitutions and political institutions. The process of
democratization is shown to be determined by inequality in economic
and political power, as well as the dynamics of economic development, while, at the same time, democratic structures shape the economic environment. We show that different scenarios of political development can arise and lead to different constitutional designs. These shape in particular the relative importance of efficiency and redistribution in the activities of the public sector, depending on the relative power and interests of different groups during the transition. Constitutions written under a strong capitalistic elite are characterized by little redistribution and a small size of the government. The reverse holds for strongly landed and less entrenched elites. The various implications of the model are shown to be in line with empirical and historical evidence.