The African Business Review May-Jun 2014 | Page 25

critics that we will advance towards median voter thesis will
provide a further justification for our purpose, namely that
democracy is an effective instrument in reducing inflation.

The third section will be a theoretical support of the above
statements; by presenting a review of the literature that have
addressed this issue. As for the second part of our study, it will be

Popular demand for public goods and services
financed by money creation, the uncertainty of
results of stabilization policies, and the slow
materialization of these results make it difficult
to control inflation in democratically developed
countries.
an empirical validation to our purpose. Following an econometric
framework, made on a heterogeneous sample of countries and a
sample consisting only of developing countries and for the period
1996- 2012, we show that democracy is statistically significant
in reducing inflation in both samples.

This empirical study will however be preceded by a
presentation of the index of measure of democracy that we use
to quantify our variable of interest, that is the index of Kaufmann
(2012). We assume that this index provides an exhaustive
conceptualization of the concept of democracy.

A critical analysis of the ‘median voter’ thesis:
Tunisia case study

According to the median voter theory, the popular demand
for public goods and services financed by money creation, the
uncertainty of the results of stabilization policies, and the slow
materialization of these results make it difficult the control
of inflation in democratic development countries. Indeed, in
development countries, where the majority of citizens do not
have access to the basic public goods and services (school, health,
water, etc) and where the governments have limited resources
to finance their expenditures, the median voter would express a
high demand for public goods during the elections. Democratic
governments are likely to mainly finance these public goods by
money creation in order to ensure their maintenances in power.
In the same way, the uncertainty of the results of stabilization
policies and the slow materialization of these results, in terms of
economic growth would reduce the preference of the median voter
for stabilization policies. In this situation, democratic governments
would be less incited to make necessary efforts for an effective
implementation of stabilization policies, which would represent
a threat for their maintenances in power (Mijiyawa, 2007).

We understand from this thesis of median voter that the
attitude of citizens towards economic reforms and the demand
that they express for public goods and services are the two main
channels through which democracy were positively linked to
inflation. The purpose of citizens is to improve their living
standards and democratic rules allow them to express their
preferences towards economic policies. On the other hand, the
goal of the political elite is to ensure their maintenance in power.
These can therefore comply to the demands of voters, choosing
to establish inflationary economic policies, and while leading
to macroeconomic imbalances, but most likely to fulfils the
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requirements of voters, in an environment of political competition.
The median voter theory describes several concrete aspects in
the relationship that links the political to the economic sphere;
however, it is based on quite restrictive assumptions.

Firstly, the above reasoning find rather its application
in developing countries, which, for the most part, have been
colonized for many years, and that is what explains the high
demand for public goods from economic agents and their
reluctance towards long term stabilization policies. These
assumptions would be challenged in a more heterogeneous range
of countries.

Secondly, the median voter is not the only participant
in electoral activity. In a democracy, power elites or the power
contenders in, are under the pressure of other economic and
social interest groups, such as capital owners, who are opposed
to inflationary policies which cause the deterioration of the value
of local currency.
Finally, we believe that the approach advocated by the thesis of
the median voter does not provide an adequate illustration of the
concept of democracy, as advocated by international organizations
such as the World Bank, Freedom House or The International
Country Risk Guide, or rating agencies.

The notion of democracy, as considered by these
organizations, and as we will consider in this analysis, provides
certainly soliciting the claim of most citizens, but incorporates as
well the concepts of contestation, transparency and accountability,
and these concepts constrain economic and policy makers to
establish effective decisions in terms of economic policy, although
they are sometimes socially undesirable.

We the