The Benefits of Balance: Credibility, the Rule of Law, and Investment in Latin America

Research surrounding political institutions and credible commitment to the rule of law is integral to recent efforts to tie democracy to economic development. I identify the determinants of rule-of-law perceptions in Latin America and argue that constraining elected officials facilitates a commitment to democracy that makes government policies credible. I also argue that aspects of politics leading to deadlock might have a hidden upside in generating policy credibility. I test my arguments against pooled cross-sectional, time series data for twenty Latin American countries between 1996 and 2012. Ultimately, my research demonstrates the benefits of functioning checks and balances among elected officials for the rule of law and provides a uniform framework linking democratic inputs to legal and economic outcomes