Corruption, economic globalization, and protests: theory and evidence for short- and long-term mechanisms

How does economic globalization intertwined with regime corruption influence protests over time? This study discerns distinct short- and long-term dynamics by which globalization and corruption influence protest frequencies in developing contexts. Empirical analysis incorporates two globalization measures: openness to foreign direct investments (FDI) and trade, quantified as ratios of FDI and trade volumes to GDP. Using data from 2003 to 2018, the paper examines FDI and trade openness to China and the U.S. as proxies for economic globalization, assessing their impact on annual protest levels in African nations. The proposed theory suggests FDI openness boosts short-term protests but curbs them in the long run, while trade openness combined with corruption produces the inverse effect. Econometric analyses, employing two-stage GLM models and the Generalized Method of Moments, yield varied results. In the first stage, I control for economic costs, considering factors like population-weighted distance between African capitals and China or the U.S., a dummy for landlocked African countries, and a WTO membership dummy for both partners. In corruption-rife African settings, heightened FDI openness, especially to the U.S., intensifies long-term protest occurrences. Conversely, trade reveals diverse effects: China-linked trade diminishes short-term protests but boosts them over extended periods, while U.S. trade effects vary based on controls. Findings underscore the nuanced influence of economic globalization, contingent on revenue sources and the recipient’s sociopolitical milieu. These findings suggest that policymakers should prioritize strengthening institutional frameworks and governance structures to mitigate the destabilizing effects of corruption on economic globalization, ensuring that benefits are distributed equitably to foster social stability.