When Do Dictators Decide to Open Trade Regimes?-Inequality and Trade Openness in Authoritarian Countries

Abstract

This paper investigates how authoritarian leaders employ trade openness as a response to rising inequality. Based on the Heckscher–Ohlin model of international trade and models of democratic transition, I argue that unskilled laborers in authoritarian regimes can benefit from engaging in international trade, thus becoming more compliant to the authoritarian rules as their countries integrate into the world economy. Therefore, dictators in labor-abundant countries expand trade to neutralize democratization threats initiated by rising inequality. My argument uses supporting data from around eighty authoritarian regimes during the period from 1963 to 2003. I address endogeneity problems with dynamic panel data and instrumental variable regression models in this paper. My analyses suggest that economic globalization helps strengthen authoritarian regimes.