Firms’ Preferences over Multidimensional Trade Policies: Global Production Chains, Investment Protection and Dispute Settlement Mechanisms
Co-Authored with In Song Kim, Thomas Bernauer, Gabriele Spilker, Iain Osgood, and Dustin Tingley
In addition to the conventional focus on market access, recent trade agreements have included investment protection, dispute settlement mechanisms, and escape clauses that enhance flexibility. We argue that preferences over these newly salient dimensions of trade policy will vary by firm, not by industry, and that a firm’s preferences will depend on its insertion into global production networks. To estimate a firm’s preferences over multiple policy dimensions, we conduct a conjoint experiment on firms in Costa Rica, a middle-income democracy in the developing world. We find that investment protection is the most salient trade policy dimension for firms who are most deeply integrated into global production networks. In addition, strong dispute settlement procedures are most valued by exporters who are not central to global supply networks. Furthermore, we find few differences across industries, thus challenging the conventional focus on inter-industry distinctions in the trade policy literature.
Public Opposition to Foreign Acquisitions of Domestic Companies: Evidence from the United States and China
Co-Authored with Adam Chilton, and Dustin Tingley
The flow of capital across borders is one of the core subjects of International Political Economy research, but there has been little research into the determinants of support for and opposition to inward foreign direct investment (FDI) flows. This is an important oversight because cross border investments are a growing area of international economic activity, and increasingly the subject of important international negotiations. In order to study this topic, we embedded a conjoint experiment in a survey that we fielded in the United States and China. Our experiment asked respondents to evaluate hypothetical acquisitions of domestic companies by foreign firms, and produced several important results. First, Chinese respondents were less opposed to foreign acquisitions of domestic firms than American respondents. Second, reciprocity matters; respondents were consistently more likely to oppose foreign acquisitions when the foreign firm’s home country does not provide reciprocal market access.Third, in both countries, economic factors had a smaller influence on the levels of opposition to foreign acquisitions than non-economic factors.
No Greater Representation with Taxation: Experimental Evidence from Ghana and Uganda on Citizen Action toward Oil, Aid, and Taxes
Co-Authored with Brandon de la Cuesta, Daniel Nielson, and Stephen Knack
Seminal contributions to political economy argue that citizens will more readily engage in political action when they are being taxed, especially compared to when their governments receive nontax revenue from oil and aid. In part this tendency is said to enable the well-known resource curse and its aid equivalent. We perform two substantively identical experiments with behavioral outcomes on nationally representative subject pools in Ghana and Uganda to estimate citizens’ likelihood of taking action to monitor spending of taxes compared to foreign aid or oil proceeds. Interestingly, sizable numbers willingly sign petitions and donate money in order to scrutinize both sources of revenue. However, we find that neither Ghanaians nor Ugandans are more likely to take action for tax revenues than for aid or oil. If anything, citizens more readily pay costs to monitor either aid or oil over taxes. Experimental results suggest that the key mechanisms by which taxation might cause representation – perceptions of greater transparency, reduced misappropriation risk, or improved public goods – do not seem to be operating in either Ghana or Uganda, which likely accounts for the lack of differential citizen action across revenue sources.
Co-Authored with Michael Findley, and Daniel Nielson
The literature on foreign assistance generally holds that multilateral aid is preferable to bilateral aid, but establishes this primarily through highly aggregated cross-national time-series data. We investigate this topic experimentally from the perspective of those whom the foreign aid directly affects: recipient citizens. We thus report results of a survey exper-iment with behavioral outcomes on more than 3,000 Ugandan citizens. The findings provide some evidence that multilateral aid is indeed preferable to bilateral aid, but the effect obtains only for some of our outcomes of interest. We disaggregate the data and compare preferences within the multilateral and bilateral categories and show evidence that aid from the U.S. government is preferred to aid from China for some outcomes.
Elite and Mass Support for Foreign Aid versus Government Programs: Experimental Evidence from Uganda
Co-Authored with Michael Findley, Adam Harris, and Daniel Nielson
Does foreign aid enable or constrain elite capture of public revenues? Building on prominent debates in the foreign aid literature, we examine whether recipient preferences are consistent with a view – called here donor control theory – that foreign donors wield substantial control over the flow of aid dollars, making elite capture more difficult and mass benefits more likely. We compare elite and mass support for foreign aid versus government spending on development projects through a survey experiment with behavioral outcomes on members of the Ugandan national parliament and a representative sample of Ugandan citizens. For two actual aid projects, we randomly assigned different funders to the projects. Significant treatment effects reveal that members of parliament support government programs over foreign aid, whereas citizens prefer aid over government. Donor control theory also implies that citizens should favor foreign aid more and elites less as their perceptions of government clientelism and corruption increase. We explore this and report on other alternative mechanisms. Effects for citizens and elites are most apparent for those perceiving significant government corruption, supporting donor control theory.
Appendix available here.
Co-Authored with Edward D. Mansfield
We present a theory of why some countries negotiate trade agreements during economic downturns. We argue that political leaders can gain from such agreements because of the signals they send to their publics. Publics are less likely to blame leaders for bad economic conditions when they have implemented sound economic policies, such as signing and implementing agreements designed to liberalize and expand trade. Leaders have particular reason to seek this type of insurance if they compete for office in a competitive political environment. The more democratic their political system is, the more they can gain from implementing trade agreements. We evaluate this argument by analyzing all preferential trade agreements (PTAs) ratified by countries since 1951. We find that democratic countries are especially likely to ratify PTAs during hard economic times.
Co-Authored with Amaney A. Jamal
What factors shape attitudes toward economic globalization? Theories in international and comparative political economy emphasize the importance of economic variables, like factor endowments, as determining preferences toward international trade. Other literature emphasizes the importance of non-economic factors, including nationalism and cultural values, like tolerance, that might explain citizens’ predispositions toward globalization. This paper attempts to adjudicate between these two competing arguments by focusing on the factors correlated with public support for increasing trade in Egypt. On the one hand, Egypt might benefit from economic globalization. On the other, it has a rich and deep socio-political history of Western colonialism, political Islam, and radicalism. This history might serve as the lens through which the potential benefits of globalization are assessed. In this paper, we investigate these questions, using data from the Pew Global Attitudes 2010 survey of Egyptians. We find that both economic and cultural factors matter, but that cultural ones may be even more influential in this particular developing country setting.
The Interaction of International and Domestic Institutions: Preferential Trade Agreements, Democracy, and Foreign Direct Investment
Co-Authored with Tim Büthe
Foreign direct investment (FDI) has come to be seen as a promising avenue for boosting economic development. As a consequence, most developing countries now seek to attract FDI, often by making ex ante promises to foreign investors not to pass laws or regulations – or refrain from other actions – that would diminish the value of the investment ex post. But how credible are such promises? A number of recent studies have examined the effect of domestic institutions (veto players, democracy, etc.) on the credibility of commitments by developing country governments toward foreign private economic actors, such as foreign investors. In addition, a few studies have examined the effect of international institutions on the credibility of such commitments. We examine the interaction of domestic and international institutions in promoting FDI. We show theoretically and empirically that democratic domestic institutions help attract more FDI into developing countries only in the context of economically liberal international institutions.
Co-Authored with Dustin H. Tingley
Recent research on political attitudes towards immigration often pits arguments emphasizing economic self-interest against ideological or cultural explanations. Many of these studies conceptualize immigration policy along a single dimension instead of disaggregating it into its distinct policy dimensions. Conditional on the type of immigration policy, different explanations should have more or less explanatory power. We disaggregate immigration policy into six different dimensions and provide theoretical scope conditions for when ideological and economic factors should matter. We test these predictions on votes on immigration policy in the US House of Representatives from 1979-2006. We advance the debate on the determinants of immigration policy by showing that both economic self-interest and ideological explanations can be powerful, depending upon the type of immigration policy under consideration.
Democracy and Trade Policy in Developing Countries: Particularism and Domestic Politics with a Case Study of India
Co-Authored with Bumba Mukherjee
What explains the variation in trade policy among democracies in developing countries? Why have some liberalized trade more than others? We analyze the impact of political particularism – defined as the degree of party discipline and the incentives for politicians to cultivate a personal vote – on trade protection. We present theoretical results from a model of particularism and its effects on tariffs; we present quantitative evidence to test the model; and then we develop a case study of India to illuminate it. Our model analyzes how an increase in particularism (that is, a shift from a party-centered to a more candidate-centered system) interacts with the degree of inter-industry occupational mobility of labor and the asset-specificity of industries to influence trade policies in developing democracies. Our model suggests that an increase in particularism induces leaders from the ruling and opposition parties to shift trade policy in equilibrium to the median voter's optimal preference, who in a developing society is a worker; and this means a reduction in trade barriers when labor mobility is high. Our data strongly support this conclusion. Our case study of India shows how the dynamics of a party-centered system operate to maintain higher trade barriers.
Co-Authored with Bumba Mukherjee
Existing research suggests that democracy fosters economic globalization by promoting trade liberalization in the developing world. We argue that democracy in developing countries generates a “skill bias” in trade protection where democratic incumbents have incentives to increase tariffs on high skilled goods but reduce trade barriers on low skilled goods. Our model analyzes how electoral competition and interest group politics in the Heckscher-Ohlin economy of a democratic developing country affects trade protection on low and high skilled goods. It predicts that electoral competition induces the government to reduce trade barriers for low skilled goods to appeal to the abundant factor, namely the low skilled median voter, who optimally prefers a reduction in tariffs for low skilled goods. Yet electoral politics also engenders lobbying pressure and campaign contributions from the scarce factor in the polity – the owners of skill-intensive industries (the interest group) – who prefers more trade protection for high skilled goods. The government rationally responds to these contributions by protecting skill-intensive industries from import competition. Empirical tests conducted on a disaggregated industry-level dataset of trade protection supports our theoretical predictions.
The Global Spread of the Internet: The Role of International Diffusion Pressures in Technology Adoption
What factors have promoted and retarded the spread of the internet globally? Much as other technologies, the internet has diffused unevenly across countries. The main proposition is that its spread is neither purely economic nor entirely domestic. International diffusion pressures exert a powerful influence. The adoption of new technology depends on domestic policy, and this in turn depends on the choices that political leaders make about rules governing new technologies. I examine the impact of international diffusion pressures on political leaders, testing the role of five types of such pressures. The distribution of capabilities globally may shape the spread of the internet, as dominant power(s) may directly or indirectly coerce others into adopting. Patterns of adoption may also be shaped by competitive pressures from the world market. Technological change especially may depend on network externalities, involving the number of adopters already in existence. Learning from other countries or from participating in international organizations may stimulate adoption. Finally, countries may simply copy the policies and hence the adoption patterns of other countries with whom they share sociological similarities. Data from about 190 countries since 1990 shows that diffusion pressures matter, even when controlling for domestic factors. Economic competition and sociological emulation play consistently important roles in affecting the spread of the internet.