The political determinants of liberalization: do ideological cleavages still matter?

Abstract

We investigate the political determinants of liberalization in OECD network industries, performing a panel estimation over 30 years, through the largest and most updated sample available. Our results contrast with the traditional wisdom according to which right-wing governments do promote market-oriented policies more intensively than left-wing ones. Our findings reveal a neglected role of the so-called neoliberalism in promoting left-wing market-oriented policy. As a result, we claim that ideological cleavages ceased to act as determinants of the liberalization wave observed in network industries. This result is confirmed when controlling for the existing regulatory conditions that executives find when elected. Furthermore, we find that the country’s exposure to other countries’ policy initiatives acts as a positive stimulus for liberalization policies

Voter Preferences, Institutions, and Economic Freedom

“…Additionally, Potrafke () found that relatively more pro‐market governments were associated with deregulation of key industries across the OECD including energy, transportation, and communication. However, Belloc and Nicita () contradict this finding, showing that in a panel of OECD countries relatively more left‐wing governments are more active in advancing market liberalization.…”

Partisan privatizations: assessing the ideological bias

“…Our econometric analysis provides a robust framework to ascertain whether rightist ideology actually drives privatization choices of governments, or if it is, instead, neutral as for other public policies (Belloc and Nicita, 2011). We have included 1-year lagged public ownership and entry barriers to market levels along with public finance indicators in a regression model for privatization.…”

Drivers of Government Activity in European Countries: Do Partisan Politics Still Divide East and West?

“…Furthermore, Potrafke (2010) as well as Smith and Urpelainen (2016) find that right-wing parties also favour product market deregulation compared with leftist parties. However, Belloc and Nicita (2011) find that ideological cleavages play no important role in the regulation of network industries, as governments under control of both left and right-wing parties pursued deregulation of such industries (compared with 'centre' governments). Overall, however, empirical evidence suggests that government ideology shapes regulation: right-wing parties more actively pursue deregulation and privatization, as opposed to left-wing parties that tend to limit economic freedom.…”