On the eve of a democratization by election, one of the most common forms of transition, dictators can use uncertainty about the future to win political support. We study the evolution of uncertainty from dictatorship to democracy in Chile using text analysis of business communications. We construct new measures of firm-level uncertainty and compare them to perceptions of international experts. We find that uncertainty changes little around the election triggering the transition and decreases markedly after the return to democracy. The exploitation of a misperceived high uncertainty epitomizes the type of errors dictators make before elections that threaten their power.
