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). CESifo Working Paper Series No. 3715, Available at SSRN: https://ssrn.com/abstract=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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