Free Trade Agreements and the Consolidation of Democracy

47 Pages Posted: 19 Feb 2013

See all articles by Xuepeng Liu

Xuepeng Liu

Kennesaw State University - Department of Economics and Finance

Emanuel Ornelas

Sao Paulo School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 18, 2013

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.

Keywords: regionalism, rent destruction, political regimes, trade liberalization

JEL Classification: F130, D720, F530, F150

Suggested Citation

Liu, Xuepeng and Ornelas, Emanuel, Free Trade Agreements and the Consolidation of Democracy (February 18, 2013). Available at SSRN: https://ssrn.com/abstract=2220123 or http://dx.doi.org/10.2139/ssrn.2220123

Xuepeng Liu

Kennesaw State University - Department of Economics and Finance ( email )

United States

HOME PAGE: http://ksuweb.kennesaw.edu/~xliu6/

Emanuel Ornelas (Contact Author)

Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/emanuelornelaseo/

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