NBER WORKING PAPER SERIES
THE GLOBALIZATION OF TRADE AND DEMOCRACY, 1870-2000 J. Ernesto López-Córdova Christopher M. Meissner Working Paper 11117 http://www.nber.org/papers/w11117 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2005
The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2005 by J. Ernesto Lopez-Cordova and Christopher M. Meissner. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
The Globalization of Trade and Democracy, 1870-2000 J. Ernesto López-Córdova and Christopher M. Meissner NBER Working Paper No. 11117 February 2005 JEL No. F1, N0 ABSTRACT 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 with other countries could bring countries like Indonesia, Russia or Venezuela to be as democratic as the US, Great Britain or France. We also see some variation in the impact of openness by region and note that commodity exporters and petroleum producers do not seem to become more democratic by exporting more of such items. J. Ernesto López-Córdova Inter-American Development Bank INT/ITD Stop W608 1300 New York Ave, NW Washington, DC 20577
[email protected] Christopher M. Meissner Faculty of Economics University of Cambridge Austin Robinson Building Sidgwick Avenue Cambridge CB3 9DD UK and NBER
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