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Free Trade Agreements and the Consolidation of Democracy

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  • Ornelas, Emanuel
  • Liu, Xuepeng

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.

Suggested Citation

  • Ornelas, Emanuel & Liu, Xuepeng, 2013. "Free Trade Agreements and the Consolidation of Democracy," CEPR Discussion Papers 9279, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9279
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    More about this item

    Keywords

    Political regimes; Regionalism; Rent destruction; Trade liberalization;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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