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Free Trade Aggreements 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

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1184.

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Date of creation: Jan 2013
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Handle: RePEc:cep:cepdps:dp1184

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Regionalism; rent destruction; political regimes; trade liberalization;

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  1. Liu, Xuepeng & Ornelas, Emanuel, 2013. "Free Trade Agreements and the Consolidation of Democracy," CEPR Discussion Papers 9279, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Xuepeng Liu & Emanuel Ornelas, 2013. "Free trade agreements and the consolidation of democracy," LSE Research Online Documents on Economics 48927, London School of Economics and Political Science, LSE Library.
  2. Katerina Gradeva & Dany Jaimovich, 2014. "Multilateral determinants of regionalism revisited," The Review of International Organizations, Springer, vol. 9(2), pages 163-203, June.
  3. Arcand, Jean-Louis & Olarreaga, Marcelo & Zoratto, Laura, 2011. "Weak Governments and Trade Agreements," CEPR Discussion Papers 8595, C.E.P.R. Discussion Papers.

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