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Free trade agreements 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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File URL: http://eprints.lse.ac.uk/48927/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 48927.

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Length: 46 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:ehl:lserod:48927
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