Democratic Backsliding and Financial Statistics Transparency

• In Event: Recruitment and Performance of Government Officials

Abstract

Extant literature on political regimes establishes that a government undergoing democratic backsliding grows less inclined to prioritize public goods. The rationale is that democratic backsliding increases the government's proclivity to cater to the particularistic interests of its narrow support coalition. While the empirical terrain on which this theoretical claim is tested is extensive and diverse, one area in which the backsliding literature has not shed light on is financial statistics transparency. It is not just that a backsliding government grows unmotivated to invest in collecting and managing financial statistics which is a quintessential public good. The government would also strategically avoid releasing information about how their economic policies are increasingly slanted towards their cronies, not the entire national economy. This way, the political leaders can minimize, or delay, the backlash from the social and (financial) market actors during an otherwise 'perilous' period of democratic backsliding.

To demonstrate that this theoretical expectation holds empirically, we use a panel data set covering a global sample from 1975 to 2020. The primary treatment variable is constructed using the V-dem data and the outcome variable, HRV Transparency Project. We report staggered difference-in-difference estimates, which remain robust to alternative empirical scenarios, as empirical evidence supportive of our expectation.

The paper makes two important contributions to the literature. First, it helps expand the horizon of the burgeoning studies that highlight the multifaceted negative consequences of democratic backsliding by highlighting the strategic choice of the government in the realm of finance. Second, it synthesizes two distinct bodies of literature, one on democratic backsliding and the other on information governance. While researchers have shown a great deal of interest in these two areas in recent years, they have seldom been bridged.

Authors

• Chungshik Moon, Chung-Ang University

• Byunghwan Son, George Mason University