The recent literature on endogenous political institutions highlights domestic economic factors, such as recessions, economic growth and inequality, as key determinants of political transitions. We argue that international capital flows and the possibility that foreign governments, in order to protect specific economic interests, might seek influence on the regime choice in other countries are important, yet overlooked, additional determinants of political institutions. Building on Acemoglu and Robinson (2001), we develop a theory of political transitions in economies with access to international capital markets and show that the possibility of foreign intervention significantly affects regime dynamics and the set of sustainable political regimes
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number
07-03.
Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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