[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_4103.html
   My bibliography  Save this paper

Free Trade Agreements and the Consolidation of Democracy

Author

Listed:
  • Xuepeng Liu
  • Emanuel Ornelas
Abstract
We study the relationship between participation in free trade agreements (FTAs) and the sustainability of democracy. Our model shows that FTAs can critically reduce the incentive of authoritarian groups to seek power by destroying protectionist rents, thus making democracies last longer. This gives governments in unstable democracies an extra motive to form FTAs. Hence, greater democratic instability induces governments to boost their FTA commitments. In a dataset with 116 countries over 1960-2007, we find robust support for these predictions. They help to rationalize the rapid simultaneous growth of regionalism and of worldwide democratization since the late 1980s.

Suggested Citation

  • Xuepeng Liu & Emanuel Ornelas, 2013. "Free Trade Agreements and the Consolidation of Democracy," CESifo Working Paper Series 4103, CESifo.
    • Handle: RePEc:ces:ceswps:_4103
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp4103.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    2. Calvo-Pardo, Hector & Freund, Caroline & Ornelas, Emanuel, 2009. "The ASEAN free trade agreement : impact on trade flows and external trade barriers," Policy Research Working Paper Series 4960, The World Bank.
    3. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Toward Nonmembers?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1531-1575.
    4. Edward D. Mansfield & Helen V. Milner & B. Peter Rosendorff, 2015. "Why Democracies Cooperate More: Electoral Control and International Trade Agreements," World Scientific Book Chapters, in: Edward D Mansfield (ed.), THE POLITICAL ECONOMY OF INTERNATIONAL TRADE, chapter 11, pages 227-263, World Scientific Publishing Co. Pte. Ltd..
    5. Nuno Limão, 2018. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 13, pages 353-371, World Scientific Publishing Co. Pte. Ltd..
    6. Caleb Stroup & Ben Zissimos, 2017. "Pampered Bureaucracy, Political Stability and Trade Integration," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 425-450, August.
    7. Giovanni Maggi & Andrés Rodríguez-Clare, 2007. "A Political-Economy Theory of Trade Agreements," American Economic Review, American Economic Association, vol. 97(4), pages 1374-1406, September.
    8. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
    9. Giavazzi, Francesco & Tabellini, Guido, 2005. "Economic and political liberalizations," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1297-1330, October.
    10. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
    11. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
    12. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.
    13. Edward D. Mansfield & Helen V. Milner & B. Peter Rosendorff, 2015. "Free to Trade: Democracies, Autocracies, and International Trade," World Scientific Book Chapters, in: Edward D Mansfield (ed.), THE POLITICAL ECONOMY OF INTERNATIONAL TRADE, chapter 7, pages 127-143, World Scientific Publishing Co. Pte. Ltd..
    14. Baldwin, Richard & Jaimovich, Dany, 2012. "Are Free Trade Agreements contagious?," Journal of International Economics, Elsevier, vol. 88(1), pages 1-16.
    15. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    16. Timothy J. Hatton & Kevin H. O'Rourke & Alan M. Taylor (ed.), 2007. "The New Comparative Economic History: Essays in Honor of Jeffrey G. Williamson," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262083612, April.
    17. Gawande, Kishore & Krishna, Pravin & Olarreaga, Marcelo, 2009. "What Governments Maximize and Why: The View from Trade," International Organization, Cambridge University Press, vol. 63(3), pages 491-532, July.
    18. Ketterer, Tobias D. & Bernhofen, Daniel & Milner, Chris, 2014. "Preferences, rent destruction and multilateral liberalization: The building block effect of CUSFTA," Journal of International Economics, Elsevier, vol. 92(1), pages 63-77.
    19. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    20. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
    21. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, April.
    22. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    23. O'Rourke, Kevin & Taylor, Alan M., 2006. "Democracy and Protectionism," CEPR Discussion Papers 5698, C.E.P.R. Discussion Papers.
    24. Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
    25. John McLaren, 2002. "A Theory of Insidious Regionalism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 571-608.
    26. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, April.
    27. Mrázová, Monika & Vines, David & Zissimos, Ben, 2013. "Is the GATT/WTO's Article XXIV bad?," Journal of International Economics, Elsevier, vol. 89(1), pages 216-232.
    28. Facundo Albornoz & Sebastian Galiani & Daniel Heymann, 2012. "Foreign investment and expropriation under oligarchy and democracy," Economics and Politics, Wiley Blackwell, vol. 24(1), pages 24-46, March.
    29. Mansfield, Edward D. & Pevehouse, Jon C., 2006. "Democratization and International Organizations," International Organization, Cambridge University Press, vol. 60(1), pages 137-167, January.
    30. Timothy Besley & Stephen Coate, 2001. "Lobbying and Welfare in a Representative Democracy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 67-82.
    31. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, September.
    32. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    33. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    34. Leonard Wantchekon, 2002. "Why do Resource Abundant Countries Have Authoritarian Governments?," Journal of African Development, African Finance and Economic Association (AFEA), vol. 5(2), pages 145-176.
    35. Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1475-1506.
    36. José Cheibub & Jennifer Gandhi & James Vreeland, 2010. "Democracy and dictatorship revisited," Public Choice, Springer, vol. 143(1), pages 67-101, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    2. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    3. Emanuel Ornelas, 2024. "Political competition and the strategic adoption of free trade agreements," CEP Discussion Papers dp2043, Centre for Economic Performance, LSE.
    4. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    5. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    6. Emanuel Ornelas, 2016. "Special and Differential Treatment for Developing Countries," CESifo Working Paper Series 5823, CESifo.
    7. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    8. Ornelas, Emanuel & Tovar, Patricia, 2022. "Intra-bloc tariffs and preferential margins in trade agreements," Journal of International Economics, Elsevier, vol. 138(C).
    9. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    10. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    11. repec:hal:spmain:info:hdl:2441/f4rshpf3v1umfa09lb0k114o5 is not listed on IDEAS
    12. Kuenzel, David J. & Sharma, Rishi R., 2021. "Preferential trade agreements and MFN tariffs: Global evidence," European Economic Review, Elsevier, vol. 138(C).
    13. Xuepeng Liu, 2016. "Trade Agreements and Economic Growth," Southern Economic Journal, John Wiley & Sons, vol. 82(4), pages 1374-1401, April.
    14. Rotunno, Lorenzo, 2016. "Political stability and trade agreements: Evidence for ‘endgame FTAs’," European Journal of Political Economy, Elsevier, vol. 45(C), pages 133-148.
    15. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    16. Ross Jestrab, 2021. "The effects of domestic labour mobility on trade agreements: Empirical evidence," The World Economy, Wiley Blackwell, vol. 44(8), pages 2238-2283, August.
    17. repec:spo:wpmain:info:hdl:2441/f4rshpf3v1umfa09lb0k114o5 is not listed on IDEAS
    18. Marco Fugazza & Frédéric Robert-Nicoud, 2012. "The ‘Emulator Effect’ Of The Uruguay Round On United States Regionalism," UNCTAD Blue Series Papers 51, United Nations Conference on Trade and Development.
    19. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2012. "The Geography of Conflicts and Regional Trade Agreements," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 1-35, October.
    20. Vicard, Vincent, 2012. "Trade, conflict, and political integration: Explaining the heterogeneity of regional trade agreements," European Economic Review, Elsevier, vol. 56(1), pages 54-71.
    21. Ketterer, Tobias D. & Bernhofen, Daniel & Milner, Chris, 2014. "Preferences, rent destruction and multilateral liberalization: The building block effect of CUSFTA," Journal of International Economics, Elsevier, vol. 92(1), pages 63-77.
    22. Giovanni Facchini & Peri Silva & Gerald Willmann, 2021. "The Political Economy of Preferential Trade Agreements: An Empirical Investigation [Distributive politics and economic growth]," The Economic Journal, Royal Economic Society, vol. 131(640), pages 3207-3240.

    More about this item

    Keywords

    regionalism; rent destruction; political regimes; trade liberalization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.