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Economic Integration and Democracy: An Empirical Investigation

Giacomo Magistretti () and Marco Tabellini ()
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Giacomo Magistretti: Northwestern University
Marco Tabellini: Harvard Business School, Business, Government and the International Economy Unit

No 19-003, Harvard Business School Working Papers from Harvard Business School

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)
Pages: 56 pages
Date: 2018-07
New Economics Papers: this item is included in nep-gro, nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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