Institutional Affiliation: Inter-American Development Bank
|The Globalization of Trade and Democracy, 1870-2000|
with : w11117
We study whether international trade fosters democracy. The likely endogeneity between democracy and trade is addressed via the gravity model of trade, allowing us to obtain a measure of natural openness. This serves as our instrumental variable for actual trade openness à la Frankel and Romer (1999). We use this powerful instrument to obtain estimates of the causal impact of openness on democratization. A positive impact of openness on democracy is apparent from about 1895 onwards. Late nineteenth century trade globalization may have helped generate the "first wave" of democratization. Between 1920 and 1938 countries more exposed to international trade were less likely to become authoritarian. Finally, our post-World War II results suggest that a one standard deviation increase in trade w...