Globalization and the (Mis)Governance of Nations

45 Pages Posted: 2 Feb 2012

See all articles by Arthur Blouin

Arthur Blouin

University of Warwick

Sayantan Ghosal

University of Warwick - Department of Economics; University of Glasgow - Adam Smith Business School

Sharun Mukand

Tufts University - Department of Economics

Date Written: January 31, 2012

Abstract

We analyze whether or not the globalization of capital, ‘disciplines’ governments and improves governance. We demonstrate that globalization affects governance, by increasing a country’s vulnerability to sudden capital flight. This increased threat of capital flight can discipline governments and improve governance and welfare by placing countries in a ‘golden straitjacket’. However, globalization may also ‘overdiscipline’ governments - resulting in a perverse impact on governmental incentives that catalyzes (mis)governance. Accordingly, the paper suggests a novel (and qualified) role for capital controls. Finally, we provide some suggestive evidence consistent with the predictions from our theoretical framework.

Keywords: globalization, governance, capital flight, capital controls, discipline

JEL Classification: F550, F360

Suggested Citation

Blouin, Arthur and Ghosal, Sayantan and Ghosal, Sayantan and Mukand, Sharun, Globalization and the (Mis)Governance of Nations (January 31, 2012). Available at SSRN: https://ssrn.com/abstract=1997078 or http://dx.doi.org/10.2139/ssrn.1997078

Arthur Blouin

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Sayantan Ghosal

University of Warwick - Department of Economics ( email )

Adam Smith Business School
University of Glasgow
Glasgow, G128QQ
United Kingdom

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

Sharun Mukand (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-5476 (Phone)
617-627-3917 (Fax)

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