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Free Trade Agreements and the Consolidation of Democracy

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  • 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.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 6 (2014)
Issue (Month): 2 (April)
Pages: 29-70

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Handle: RePEc:aea:aejmac:v:6:y:2014:i:2:p:29-70

Note: DOI: 10.1257/mac.6.2.29
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Citations

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Cited by:
  1. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, American Economic Association, vol. 6(2), pages 29-70, April.
  2. Alecia Waite Cassidy & Edward Tower & Xiaolu Wang, . "Manufacturing Fetishism: The Neo-Mercantilist Preoccupation with Protecting Manufacturing," Working Papers, Research Seminar in International Economics, University of Michigan 639, Research Seminar in International Economics, University of Michigan.
  3. Arcand, Jean-Louis & Olarreaga, Marcelo & Zoratto, Laura, 2011. "Weak Governments and Trade Agreements," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8595, C.E.P.R. Discussion Papers.
  4. Katerina Gradeva & Dany Jaimovich, 2014. "Multilateral determinants of regionalism revisited," The Review of International Organizations, Springer, Springer, vol. 9(2), pages 163-203, June.

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