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Free Trade Aggreements and the Consolidation of Democracy

  • Xuepeng Liu
  • Emanuel Ornelas

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

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  1. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization toward NonMembers?," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1531-1575, November.
  2. Xuepeng Liu & Emanuel Ornelas, 2013. "Free Trade Agreements and the Consolidation of Democracy," CESifo Working Paper Series 4103, CESifo Group Munich.
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  28. Tobias Ketterer & Daniel Bernhofen & Chris Milner, . "Preferences, Rent Destruction and Multilateral Liberalisation: The Building Block Effect of CUSFTA," Discussion Papers 12/09, University of Nottingham, GEP.
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  30. Nuno Limao, 2006. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," American Economic Review, American Economic Association, vol. 96(3), pages 896-914, June.
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