Economic Integration and Democracy: An Empirical Investigation

Marco Tabellini and Giacomo Magistretti

No 14336, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study whether economic integration fosters the process of democratization and the channels through which this might happen. Our analysis is based on a large panel dataset of countries between 1950 and 2014. We instrument actual trade with predicted trade constructed by estimating a time-varying gravity equation similar to Feyrer (2009). We find that economic integration has a positive effect on democracy, driven by trade with democratic partners and stronger for countries with lower initial levels of economic and institutional development. These results are consistent with a learning/cultural exchange process whereby economic integration promotes the spread of democracy from more to less democratic countries. We corroborate this interpretation by providing evidence against alternative mechanisms, such as income effects, human capital accumulation, and trade-induced changes in inequality.

Keywords: Democracy; Institutional development; Economic integration; International trade (search for similar items in EconPapers)
JEL-codes: F14 F15 P16 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-gro, nep-int and nep-pol
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Citations: View citations in EconPapers (5)

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