The effect of democratization on election-oriented economic policy: evidence from South Korea

Abstract

The purpose of this study is to explore the effect of electoral politics on macroeconomic and distributive policy in East Asian “developmental states” using empirical evidence from South Korea. Based on existing theories of political budget cycles (PBCs) and distributive politics, this study examines how democratization affects the pattern and degree of political budget cycles and targeted spending. Contrary to the bureaucracy dominance thesis in developmental state theory, I argue that authoritarian leaders in Korea had incentives to manipulate macroeconomic conditions before elections to increase the ruling party’s urban representation. The incentives for PBCs and targeted spending under authoritarian rule were, of course, smaller than that under democracy, but the constraints on PBCs and targeted spending were also smaller under authoritarian rule. I find that PBCs occurred in Korea before and after democratization and that democratization did not affect the degree of PBCs in statistical terms. Based on these findings, I conclude that the increased constraints (checks and balances) offset the increased incentives (electoral competition) after democratization. This study also pays attention to the institutional variables that shape incumbent’s preference regarding tactical allocation: the N=2 Single Non-Transferable Vote (SNTV) system under authoritarian rule adopted to increase ruling party’s urban representation; the five-year single term presidency under democracy that led the president’s goal to focus on preempting early lame-duck status and obtaining a graceful retirement. Based on the analysis of the institutional effect on identifying target group, I demonstrate that the main target for the incumbents during the authoritarian period was swing voters in urban areas, while the main targets for the incumbents during the democratic period were both the incumbent’s core support group and opposition backers.