Preparing for a Long Run: What Explains Variation in Countries’ Vulnerability to International Shocks?

42 Pages Posted: 11 Jun 2011

See all articles by Michaël Aklin

Michaël Aklin

University of Pittsburgh - Department of Political Science

Johannes Urpelainen

Johns Hopkins SAIS

Date Written: June 10, 2011

Abstract

Why are some countries able to adjust to international shocks, while others are highly vulnerable to them? We posit that domestic political institutions interact with international shocks to influence a country’s ability to adjust and thus, in the long run, vulnerability. Democratic governments are generally more interested in paying the adjustment cost, because their political survival depends on reducing broad constituencies’ vulnerability to international shocks. Among democracies, however, the importance of good regulatory institutions is fundamental. Democratic governments with access to good regulatory institutions can prepare for a long run: if they enact policies, competent implementation will achieve reduced vulnerability over time. Democratic governments without good regulatory institutions may enact policies under international shocks, but the poor quality of policy implementation prevents them from reducing their vulnerability in the long run. To test this theory, we examine how oil prices, democracy, and corruption problems influence national energy intensity trajectories and energy policy formation.

Keywords: market failure, international shocks, governance, corruption, energy market

JEL Classification: H1, Q2, Q48

Suggested Citation

Aklin, Michaël and Urpelainen, Johannes, Preparing for a Long Run: What Explains Variation in Countries’ Vulnerability to International Shocks? (June 10, 2011). Available at SSRN: https://ssrn.com/abstract=1862233 or http://dx.doi.org/10.2139/ssrn.1862233

Michaël Aklin (Contact Author)

University of Pittsburgh - Department of Political Science ( email )

4600 Posvar Hall
Pittsburgh, PA 15260
United States

Johannes Urpelainen

Johns Hopkins SAIS ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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