Some Observations on the Economic Implications of Constitutional Reform in Armenia

Abstract

Armenia is preparing for a major reform of its constitution. The draft of the new constitution proposes a switch to a parliamentary system from the current (semi-) presidential system and to a proportional electoral rule from the existing (semi-) majoritarian system, among other changes. In this short article, I present some stylized facts and summarize the existing knowledge about the economic effects of constitutions. This body of evidence suggests that a switch to a parliamentary system with proportional representation may create political institutions that favor a larger public sector in Armenia with a particular pro-spending bias in social insurance programs. On the political side, descriptive evidence based on conventional democracy scores suggests that parliamentary countries, on average, have more developed democratic institutions. However, a closer look at countries that switched to parliamentary systems in the 1990s and 2000s reveals that governments opt for a constitutional change primarily to utilize more not less political power.