International Trade And Democracy: How Trade Partners Affect Regime Change And Persistence

Abstract

This paper explores how international trade flows contribute to democracy and shows that countries' trade partners define the nature of this relationship: higher volumes of trade with democracies are conducive to democracy, while higher trade levels with autocracies undermine it. Moreover, the effects of trade are uneven and are pronounced only for 49 states (34% of the sample). Results also indicate that trade with democracies does not sufficiently influence democratic transitions but rather helps already established democracies to endure. The autocratic trade, on the opposite, undermines democratic survival, and it also reduces the probability of transition from partial democracies. Therefore, trade only partially supports democratic promotion when it is, indeed, a source of authoritarian promotion and consolidation. These findings are robust to accounting for autocorrelation, checking sensitivity of model specifications and acknowledging that democracy is measured with error. Finally, Instrumental Variable estimation, using predicted trade volumes from the Gravity Equation, shows that these effects are also causal.