The Political-Economy Trilemma

Joshua Aizenman and Hiro Ito

Open Economies Review, 2020, vol. 31, issue 5, No 1, 945-975

Abstract: Abstract This paper investigates Rodrik’s political-economy trilemma: policy makers face a trade-off of choosing two out of three policy goals or governance styles, namely, (hyper-) globalization, national sovereignty, and democracy. We develop a set of indexes that measure the extent of attainment of the three factors for 139 countries in the period of 1975–2016. Using these indexes, we examine the validity of the hypothesis of the political-economy trilemma by testing whether the three trilemma variables are linearly related. We find that, for industrialized countries, there is a linear relationship between globalization and national sovereignty (i.e., a dilemma), and that for developing countries, all three indexes are linearly correlated (i.e., a trilemma). We also investigate whether and how three political-economic factors affect the degree of political and financial stability. The results indicate that more democratic industrialized countries tend to experience more political instability while developing countries tend to be able to stabilize their politics if they are more democratic. The lower level of national sovereignty an industrialized country attains, the more stable its political situation tends to be, while a higher level of sovereignty helps a developing country to stabilize its politics. Globalization brings about political stability for both groups of countries. Furthermore, more globalized countries, whether industrial or developing, tend to experience more financial stability. Future data will allow us to test the possibility of regime changes associated with the post-2016 dynamics.

Keywords: Impossible trinity; globalization; financial crisis (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s11079-020-09588-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Political-Economy Trilemma (2020)
Working Paper: The Political-Economy Trilemma (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:31:y:2020:i:5:d:10.1007_s11079-020-09588-1

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-020-09588-1

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().