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Does Membership in International Organizations Increase Governments’ Credibility? Testing the Effects of Delegating Powers

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  • Axel Dreher
  • Stefan Voigt

Abstract

This paper analyzes whether nation-state governments can increase their credibility by becoming members of international organizations. Credibility is an important asset because it determines the real interest rate and is expected to have an important impact on investment and growth. It is hypothesized that the degree of delegation to international organizations can improve the credibility of nation-state governments. This hypothesis is tested by introducing three new indicators for international delegation. On the basis of panel data for up to 136 countries and the time period from 1984 to 2004, membership in international organizations is significantly and robustly linked with better credibility, here proxied for by country risk ratings. Two more results stand out: the longer a country has had a high level of membership, the higher its credibility, ceteris paribus; and: the credibility-enhancing effect is strongest in countries whose domestic institutions are weak.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2285.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2285

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Keywords: delegation of competence; credibility; dilemma of the strong state; international organizations;

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Cited by:
  1. Schmaljohann, Maya, 2013. "Enhancing Foreign Direct Investment via Transparency? Evaluating the Effects of the EITI on FDI," Working Papers 0538, University of Heidelberg, Department of Economics.
  2. Niklas Potrafke, 2014. "The Evidence on Globalization," CESifo Working Paper Series 4708, CESifo Group Munich.
  3. Dreher, Axel & Mikosch, Heiner & Voigt, Stefan, 2010. "Membership has its privileges: The effect of membership in international organizations on FDI," Center for European, Governance and Economic Development Research Discussion Papers 114, University of Goettingen, Department of Economics.
  4. Leonardo Baccini & Soo Kim, 2012. "Preventing protectionism: International institutions and trade policy," The Review of International Organizations, Springer, vol. 7(4), pages 369-398, December.
  5. Schmaljohann, Maya, 2013. "Enhancing Foreign Direct Investment via Transparency? Evaluating the Effects of the EITI on FDI," Working Papers 538, University of Heidelberg, Department of Economics.
  6. Hans Pitlik & Björn Frank & Mathias Firchow, 2010. "The demand for transparency: An empirical note," The Review of International Organizations, Springer, vol. 5(2), pages 177-195, June.
  7. Voigt, Stefan & Gutmann, Jerg, 2013. "Turning cheap talk into economic growth: On the relationship between property rights and judicial independence," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 66-73.
  8. Fischer, Justina A.V. & Somogyi, Frank, 2012. "Globalization and protection of employment," MPRA Paper 39426, University Library of Munich, Germany.
  9. Stephen Nelson, 2010. "Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law," The Review of International Organizations, Springer, vol. 5(2), pages 107-139, June.

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