When Will States Liberalize?: Lost Monies as an Explanation for Institutional Change. (with Olga Chyzh). pdf version.
Abstract: Most examinations of state liberalization focus on political change and the likelihood of democratization in the state. However, this misses the real effects that economic change has in providing the institutional structure that facilitates these democratic processes. Starting with the theoretical premise that international leaders balance between the domestic costs and international incentives of political liberalization, we argue that states liberalize when the monies lost as a result of poor institutional design are consequential for leaders’ tenure. Our results strongly support this argument. Using a global cross-section of states from 1960 to 2009, we find that the opportunity cost of lost trade and FDI due to poor institutions matters tremendously for certain states and explains future economic liberalization.
Abstract: Most examinations of state liberalization focus on political change and the likelihood of democratization in the state. However, this misses the real effects that economic change has in providing the institutional structure that facilitates these democratic processes. Starting with the theoretical premise that international leaders balance between the domestic costs and international incentives of political liberalization, we argue that states liberalize when the monies lost as a result of poor institutional design are consequential for leaders’ tenure. Our results strongly support this argument. Using a global cross-section of states from 1960 to 2009, we find that the opportunity cost of lost trade and FDI due to poor institutions matters tremendously for certain states and explains future economic liberalization.