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Free trade agreements and the consolidation of democracy

Liu, Xuepeng and Ornelas, Emanuel (2014) Free trade agreements and the consolidation of democracy. American Economic Journal: Macroeconomics, 6 (2). pp. 29-70. ISSN 1945-7707

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Identification Number: 10.1257/mac.6.2.29

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.

Item Type: Article
Official URL: http://www.aeaweb.org/aej/mac/index.php
Additional Information: © 2014 AEA
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
J Political Science > JA Political science (General)
Sets: Departments > Management
Research centres and groups > Centre for Economic Performance (CEP)
Research centres and groups > Managerial Economics and Strategy Group
Date Deposited: 12 May 2014 09:03
Last Modified: 12 May 2014 09:04
URI: http://eprints.lse.ac.uk/id/eprint/56707

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