Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Do Authoritarians Use Trade Openness to Preserve their Power?
Wen-Chin Wu of National Taiwan University recently published a paper entitled "When Do Dictators Decide to Open Trade Regimes?—Inequality and Trade Openness in Authoritarian Countries" in the journal International Studies Quarterly (2014, pp 1-12) It's results suggest it may be a mistake for democracies to support or encourage open trade with autocratic regimes in the belief that trade openness will promote democratic change in those regimes.
According to the 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."
There is a long-standing argument in the field of International Relations between those who think that trade openness promotes democratic change in authoritarian regimes (which in turn would seem to imply that democracies ought to encourage autocratic regimes to open trade), and those who think that autocracies use trade to strengthen their domestic control. Wu's study is clearly in the second camp.
Journal of Economic Literature:
Atlantic Economic Journal: