An Economic Theory of Political Institutions: Foreign Intervention and Overseas Investments

Toke Aidt and Facundo Albornoz

Discussion Papers from Department of Economics, University of Birmingham

Abstract: The recent literature on endogenous political institutions highlights domestic economic factors, such as recessions, economic growth and inequality, as key determinants of political transitions. We argue that international capital flows and the possibility that foreign governments, in order to protect specific economic interests, might seek influence on the regime choice in other countries are important, yet overlooked, additional determinants of political institutions. Building on Acemoglu and Robinson (2001), we develop a theory of political transitions in economies with access to international capital markets and show that the possibility of foreign intervention significantly affects regime dynamics and the set of sustainable political regimes

Keywords: Political transitions, democracy, autocracy, foreign investments; foreign government intervention (search for similar items in EconPapers)
JEL-codes: D72 D74 H71 O15 P16 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2007-03
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
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Citations: View citations in EconPapers (1)

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