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International Institutions and Political Liberalization: Evidence from the World Bank Loans Program

59 Pages Posted: 7 Mar 2014  

Peter M. Aronow

Yale University - Department of Political Science

Allison Carnegie

Columbia University

Cyrus Samii

New York University (NYU) - Wilf Family Department of Politics

Date Written: March 5, 2014

Abstract

How do international institutions affect political liberalization in member states? Motivated by an examination of the World Bank loans program, we argue that institutions can confer prestige in exchange for political reforms. When offered an opportunity to improve their institutionally-conferred status, thereby boosting their international and domestic reputations, states are willing to make policy concessions in exchange. To test our theory, we exploit a unique feature of the World Bank loans program: when a loan recipient reaches a specified level of economic development, it becomes eligible to graduate from borrower status. Although graduation entails losing access to loans, governments typically seek to graduate. We show that governments view graduation as an indicator of the transition from a developing state to a developed state. Using a unique regression discontinuity design, we demonstrate that when states become eligible for graduation, their governments democratize to achieve this enhanced status. Thus, a government's interest in improving its status in the international system can motivate domestic reform.

Keywords: democracy, natural experiment, regression discontinuity, World Bank

Suggested Citation

Aronow, Peter M. and Carnegie, Allison and Samii, Cyrus, International Institutions and Political Liberalization: Evidence from the World Bank Loans Program (March 5, 2014). Available at SSRN: https://ssrn.com/abstract=2405297 or http://dx.doi.org/10.2139/ssrn.2405297

Peter Michael Aronow (Contact Author)

Yale University - Department of Political Science ( email )

P.O. Box 208301
New Haven, CT 06520-8269
United States

Allison Carnegie

Columbia University ( email )

1331 International Affairs Bldg.
420 W. 118th Street
New York, NY 10027
United States

Cyrus Samii

New York University (NYU) - Wilf Family Department of Politics ( email )

715 Broadway
New York, NY 10003
United States

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