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Economic Liberalism in Illiberal Regimes: Authoritarian Variation and the Political Economy of Trade Charles R.

Hankla Daniel Kuthy Department of Political Science Georgia State University PO Box 4069 Atlanta, GA 30302-4069

Abstract Over the last few decades, a large literature has emerged examining the relationship between democratic political institutions and trade policy outcomes. While this literature has added significantly to our knowledge, it has effectively ignored policy-making in dozens of important states those that remain autocratic. This paper fills that hole by exploring the effects of authoritarian variation on national trade policies. Our contention is that more institutionalized authoritarian regimes will tend to adopt more open trade policies. This relationship should hold, we argue, for two distinct reasons. First, we argue that, as the size of an autocratic regimes selectorate increases, so will its incentives to provide public rather than private goods. As a result, we expect that multiparty, and to a lesser extent single party, autocracies will tend to prefer more open trade policies than non-party (often personalistic) dictatorships, monarchies, and military juntas. Second, we contend that more stable autocratic regimes will have longer time horizons and therefore greater incentives to adopt policies, such as trade openness, that may strengthen long-run economic performance. We find strong support for these arguments using several cross-national time-series models of all autocracies ranging from 1962 to 2007 (contingent on data availability).

Paper prepared for presentation at the Annual Conference of the International Studies Association, Montreal, Quebec, Canada, March 2011.

Introduction Over the last few decades, a large literature has emerged examining the relationship between democratic political institutions and trade policy outcomes. While this literature has added significantly to our knowledge of the political determinants of commercial openness, it has effectively ignored policy-making in dozens of important states those that remain autocratic. Despite the recent waves of democratization, it seems apparent that authoritarian regimes are not likely to become relics in the near future, so it is important to understand them and their economic behavior better. This paper seeks to do that by drawing on recent scholarship in comparative politics to explore the effects of authoritarian variation on national trade policies. For the purpose of this study, we define authoritarian regimes as those in which the primary decision-makers cannot be removed from power by democratic means. Scholars of comparative political institutions have divided authoritarian regimes into a variety of sub categories, including military juntas, personalistic dictatorships, monarchies, single party regimes, and multi-party authoritarian regimes. 1 Our contention is that more institutionalized authoritarian regimes will tend to adopt more open trade policies. This relationship should hold, we argue, for two distinct reasons. First, more institutionalized autocracies will tend to incorporate more dissenting voices into the governing process, increasing the size of their selectorate. 2 As the number of people that a leader must satisfy in order to stay in power grows, it becomes increasingly difficult for her to pay off all relevant political actors through protectionist policies. Instead, an autocratic leader must look increasingly toward public goods such as free trade, whose effects fall on society widely. As a result, we expect that multiparty,

1 2

Geddes 1999; Hadenius, & Teorell. 2007. Buena de Mesquita et al. 2003., Kim and Gandhi 2010.

and to a lesser extent single party, autocracies will tend to prefer more open trade policies than non-party (often personalistic) dictatorships, monarchies, and military juntas. Put differently, the more liberal that illiberal regimes are, the more they are likely to engage in free commerce. Second, we argue that more institutionalized autocratic regimes will have longer time horizons and therefore greater incentives to adopt policies, such as trade openness, that may strengthen long-run economic performance. The positive effects of free trade tend to be more dispersed across society and are less likely to be immediately felt by many people within a country. Free trade, however, can have long-term positive effects on a countrys economy that leaders that are more secure in their positions would be interested in achieving. Therefore, we argue, more stable regimes will be better able to pursue a more liberal approach to trade because, unlike a regime that is more vulnerable, they can afford to wait for the benefits of such policies. We find strong support for both of our arguments using several cross-national time-series models of autocracies from 1962 to 2007 (contingent on data availability). Our investigation contributes to the existing literature in two ways. First, it fills in a gap in the literature on domestic institutions and international trade by looking at variation in trade policy among different authoritarian regimes. Second, it extends past research into how the variation in authoritarian institutions affects policy outputs into the understudied area of trade policy. Our article proceeds in the following manner: first, we provide a review of the separate literatures on trade policy and on authoritarian variation, followed by an explication of our theory and our general expectations. Next we describe our statistical models, interpret our results, and finally discuss how they address questions in the field.

Trade Policy and Political Institutions Scholars of trade policy have long debated whether democracy or autocracy is better for trade, with many authors finding an association between representative political institutions and liberal policies. Some scholars, making an essentially monadic argument, attribute this relationship to the larger constituency of democratic governments. For example, Milner and Kubota find that democracies in the developing world tend to have more liberal trade policies than autocracies because their larger selectorates empower free trading labor interests. Other scholars claim that the link between democracy and free trade is primarily the effect of dyadic relationships between democracies, which tend to have higher levels of trade with one another than with authoritarian regimes.3 Analyzing nearly 2,000 dyads, Bliss and Russett find that democracies are significantly more likely to trade with one another. They believe that, among other things, this relationship is due to the lower security externalities that arise when democracies trade with other democracies.4 In a similar study, Mansfield, Milner, and Rosendorff find that the volume of trade among democratic regimes is significantly higher than between mixed (democratic and authoritarian) dyads, but that there is little difference between levels of trade in matching dyads of democratic or authoritarian regimes. They argue that democracies generally have more liberal trade policies with one another due to the ratification powers of their legislatures.5 In a later paper, Mansfield, Milner and Rosendorff extend their argument to preferential trade agreements, finding that in this form of cooperation too there is a democratic dividend.6

For example, see Mansfield, Milner and Rosendorff 2000, Bliss and Russett 1998, Russett and Oneal 2001,

Morrow, Siverson, and Tabares 1998. 4 Bliss and Russett 1998. 5 Mansfield, Milner, and Rosendorff 2000. 6 Mansfield, Milner and Rosendorff 2002.

Some, such as Kono, have reservations about the association between democracy and free trade. 7 According to Kono, democratic governments face pressures from both interest groups demanding protection and publics that on average prefer more liberal trade policies. These cross-cutting pressures lead them to choose lower tariff levels than autocratic governments, but to make greater use of non-tariff barriers that are less visible to the public (and often to scholars). In addition to comparisons between democratic and authoritarian regimes, scholars have looked at how variance in the political institutions of democracies affects their trade policies. For example, a number of authors have found that the degree of insulation from interest groups that democratic institutions provide can have a significant positive effect on the degree of trade liberalization. The specific institutions that past research has associated with free trade include a proportional electoral system, 8 unified party government across executive and legislature, 9 low party fragmentation in the legislature,10 centralized political parties,11 and stable linkages between parties and voters.12 McGillivray is more concerned with the distribution rather than the level of trade protection; she argues that protection will be targeted to swing districts in strong party majoritarian systems. 13 Ehrlich, on the other hand, seeks to combine these multiple institutions into a single theory, arguing that democracies with more institutional access points for lobbyists will have more closed economies. 14

Authoritarian Regime Variation

7 8

Kono 2006. Rogowski 1987. 9 OHalloran 1994. 10 Haggard and Kauffman 1995. 11 Nielson 2003. 12 Author 2006. 13 McGillivray 2004. 14 Ehrlich 2007.

In developing our theory linking differences in authoritarian institutions with trade policy outcomes, we also draw on the burgeoning literature on authoritarian variation. Scholars have been developing autocratic regime classifications for years, beginning with an effort to distinguish authoritarian from totalitarian systems.15 Over time, these classifications have become more sophisticated and have allowed scholars to understand the dynamics of various types of autocracies, from single-party dictatorships to military juntas and from traditional monarchies to personalistic regimes. Many authoritarian regimes incorporate seemingly democratic features, such as legislatures and multiparty elections. Political scientists are beginning to challenge the preexisting consensus that such institutions are meaningless propaganda and are investigating what functions they might serve.16 To take a prominent example, Gandhi argues that legislatures in autocratic and hybrid regimes perform the vital function of facilitating bargains between the regime and opposition leaders. They can also improve the stability of more broadly-based authoritarian governments by incorporating powerful actors into the policy-making process.17 If authoritarian institutions matter, then, how do they affect policy outcomes under dictatorship? A new but rapidly growing literature explores this question. For example, in a study of the distributional policy of authoritarian regimes, Gandhi and Przeworski find that those that had limited multi-party legislatures were more likely to make policy concessions to various social groups because these institutions provide a convenient forum for making bargains.18

15 16 17 18

Arendt 2009 [1951]; Friedrich and Brzezinski 1965. For example Gandhi 2008; Gandhi and Przeworski 2006; Diamond 2002; Brownlee 2009. Gandhi 2008. Gandhi and Przeworski 2006.

Likewise, Kim and Gandhi argue that more institutionalized autocratic regimes are better able to maintain labor peace by incorporating the interests of workers into the governing process.19 Perhaps the most thoroughly researched question taken up by this new literature concerns the effects of authoritarian institutional variation on economic growth. Quinn and Woolley find that autocracies tend to be less risk-adverse in their economic policies in comparison with democratic regimes, producing more volatility and variation in their growth rates.20 But how do authoritarian states compare amongst themselves? Gandhi finds that autocracies that make use of quasi-democratic institutions such as parties and legislatures tend to have higher economic growth rates than those that do not.21 This is because, she argues, such institutions contribute to greater transparency and policy stability in the regimes where they exist. Wright qualifies this argument by distinguishing between legislatures that constrain autocratic leaders, associated with regimes that rely on domestic investment, and those do not, associated with regimes that rely more on natural resources. Only when autocracies possess legislatures with the power to restrain executive action, he argues, will such institutions promote growth. 22 Pepinsky, on the other hand, finds that autocratic states that rely for support on businesses with varying levels of capital mobility will have a difficult time crafting a coherent response to economic crises.23

Our Theory: Authoritarian Regime Types and Trade Despite the remarkable progress of democratization in the past several decades, many countries in the world remain under authoritarian rule. According the most recent Polity IV data, 95 out of the 164 countries which they track qualify as democratic with a score of 6 or better.
19 20

Kim and Gandhi 2010. Quinn and Wooley 2001. 21 Gandhi 2008. 22 Wright 2008. 23 Pepinsky 2008.

That leaves 69 countries, over one third, that are ruled by authoritarian or quasi-authoritarian regimes, a number which almost certainly understates the number of non-democracies in existence.24 Since it seems likely that authoritarian regimes will continue to exist for quite some time, it is important to understand how they function, including how different institutional arrangements within autocracies affect policy outcomes. We seek to address part of this question by looking at trade policy within different types of authoritarian and quasi-authoritarian regimes. Our overall argument is that more institutionalized authoritarian states will tend to choose freer trade policies. By institutionalization, we mean the participation of quasi-democratic institutions such as political parties in the governing process, along with the incorporation of a wider variety of social actors into policy-making. The relationship between institutionalization and free trade should hold for two reasons. First, we argue, more institutionalized regimes will tend to incorporate more social actors into policy-making, expanding the incentives for dictators to provide public goods such as free trade. Second, institutionalized regimes will tend to be more stable, a fact that will lengthen their time horizons and encourage them to pursue policies, such as free trade, that can have long run economic benefits.25 To develop our first argument, we draw on the comparative politics literature for our understanding of authoritarian regime types and on the trade literature for insight into how social preferences are aggregated under different political institutions. We also make use of the selectorate theory of Bueno de Mesquita et al.26 This new approach to understanding politics begins with the assertion that both democracies and autocracies must rely on portions of society

24 25

Marshall and Jaggers 2000. It is worth noting that institutionalized autocracies are not automatically more inclusive or stable. Nevertheless, as

noted above, much of the literature draws a link between institutionalization, stability, and inclusiveness. Kim and Gandhi 2010, for example, make a similar argument to the one here that relates institutionalization to labor quiescence in autocracies. In addition, we measure stability and inclusiveness directly in our empirical models. 26 Buena de Mesquita et al. 2003.

for support in order to stay in power. All individuals or groups that play a role in choosing the government are members of what Bueno de Mesquita and his co-authors term the selectorate. In a democracy, the selectorate is the same as the electorate and includes all voters, but in an autocracy, the selectorate can comprise, for example, the military, the business elite, the party central committee, or some other group. Bueno de Mesquita and his co-authors term the portion of the selectorate that governments must win in order to stay in power the winning coalition. The vital support of this winning coalition can be secured by providing its members either private or public goods. Private goods are those benefits that are specifically directed to an individual or small group, while public goods are those which benefit society more broadly.27 In a related argument, Ronald Wintrobe explores the calculations of authoritarian leaders by placing their decisions on extraction and distribution in a political economy framework. 28 He explains that in making decisions, dictators, in order to remain in power, must make enough payoffs to individuals in order to sway their calculations in the direction of supporting, or at least not opposing, the dictators rule. While some of these payments must be made to citizens broadly, the most critical groups to satisfy are those on which the dictator directly relies for power. Drawing on these insights, we argue first that authoritarian regimes that rely on a larger selectorate in order to remain in power will, on average, favor more open trade policies than regimes with relatively limited selectorates. With regard to trade policy, there are two main approaches that a government can take in order to increase its chances of staying in power. It can either attempt to protect enough industries in order buy off key supporters, or it can pursue a

27 28

Buena de Mesquita et al. 2003. Wintrobe 1998.

more liberal trade policy that benefits the population more broadly. The logic behind the first approach is straightforward. If certain groups in society that would prefer protection for their particular business sectors receive favorable policy concessions, they are more likely to support the government. The second approach is somewhat less direct, and it operates under the understanding of free trade as a public good. Perhaps the most basic finding of neo-classical trade theory is that countries gain by specializing in the production of goods for which they have a comparative advantage and then trading those goods on international markets. Free trade, of course, has losers, but its benefits tend to be greater than its drawbacks in the aggregate. As a result, free trade is in some ways a public good, one that provides benefits to society as a whole. We argue here that autocratic leaders with large selectorates will find it increasingly difficult to pay off key supporters through protectionist trade policies. Because of the large number of interests that would need to be protected, following such a strategy would require a broad closure of the economy to foreign trade, which could have significant costs to economic growth. Broad protectionism could also (1) invite retaliation on the part of trading partners, angering exporters, (2) raise the price of intermediate goods, angering domestic producers, and (3) raise the price of consumer goods, potentially producing unrest and popular resistance. In a more closed autocracy with a small selectorate, keys supporters could be bought off with limited protectionism and the minor economic disruption that results could be absorbed by politically important actors. But, as selectorates grow, the scale of protectionism needed to stay in power grows, as does the probability that this protectionism will hurt politically relevant actors. As a result, free trade provides a more rational approach to leaders of more liberal autocracies because


it offers a simple way of benefiting large numbers of supporters without the negative economic consequences of autarchy. This argument holds most clearly in a world of mobile factors, as described by the Heckscher- Ohlin Model and its Stolper-Samuelson Corollary. In such a world, abundant factors prosper under free trade. As nearly all autocratic countries are in the developing world, labor is their abundant factor and should therefore prefer open borders. It stands to reason that, as a regimes selectorate grows, so too will the power of labor and, with that power, pressures to liberalize commerce. A similar point has already been made by Milner and Kubota in their comparison of democracies and autocracies in the developing world.29 The argument also holds in a world of specific factors, the core assumption of the Ricardo-Viner Models, although perhaps less universally. When land and capital are immobile, free trade benefits workers and investors in export competitive industries and hurts those in import competing industries. At the same time, it benefits consumers and those in non-tradables by lowering the cost of goods. While a small-selectorate regime beholden to exporting interests might have a stronger preference for free trade than a larger selectorate regime that also incorporates import-competing industries, the general trend should be a clear association between regime liberalization and trade liberalization. As discussed above, regimes with large selectorates will find buying support with trade protection to be highly costly both economically and politically, as such a policy could impede economic growth while alienating consumers and those associated with exporting and non-tradable industries. Free trade should therefore be a more attractive choice. Which authoritarian regimes are most politically liberal? Among the authoritarian regime types often identified in the literature, multiparty, and to a lesser extent single party,

Milner and Kubota 2005.


regimes will tend to have the largest selectorates. Therefore, we argue that multiparty and single party authoritarian regimes will have more open trade policies than other authoritarian regime types, other things equal. More specifically, in the Wright / Geddes data (discussed below), the coding is divided into four categories: single-party, military, monarchist, and personalist regimes. In the tests using this data, we expect that single party regimes will tend to have more liberal trade policies than other authoritarian regime types. For the tests using the Hadenius and Teorell data, we expect that multiparty regimes will tend to have more liberal trade policies in comparison to any of the other four regime types (single-party, military, monarchy, and personalist regimes). The second component of our argument is that regime stability, another byproduct of institutionalization, encourages free trade policies among authoritarian regimes. As a regimes stability increases, the time horizons of its authoritarian leaders will also grow longer. These longer time horizons, in turn, produce powerful incentives to enact policies that will benefit the countrys economy in the long-run rather than just shore up support for the leadership in the immediate future. As Olson has argued, even klepocratic dictators have good reason to maintain the health of their national economies, if only to provide sources of future loot. 30 By contrast, authoritarian leaders sitting atop unstable regimes and fearing removal will not be thinking about the long term future. Instead, their focus will be providing immediate benefits to their supporters in order to remain in power. As a consequence, the leaders of more stable autocratic regimes will be more likely to provide the public good of free trade, while those whose hold on power is precarious will tend to rely on particularistic good such as protectionism to keep their winning coalitions intact.


Olson 1993.


This argument follows the logic presented by Author on time horizons and trade policy decisions in democracies, except that we are concerned here with authoritarian stability rather than electoral volatility.31 It is also similar to the argument developed by Wright linking long time horizons in authoritarian regimes to the effectiveness of foreign aid (a rare piece of research exploring the policy implications of regime stability under dictatorship).32 Indeed, the prospects for regime stability to matter are perhaps greater in authoritarian regimes than in democracies, because for ruling groups in these regimes, losing power often results in death or imprisonment. Therefore, the pressure for protectionism in an attempt to gain short-term support in new or unstable regimes is likely to be even greater for authoritarian governments than for those in a democracy. Additionally, truly stable authoritarian regimes tend to have individual leaders with very long time horizons (far beyond those of stable democratic leaders), providing them with stronger incentives to choose policies, like free trade, that may contribute to long-run economic growth. Seeking to understand trade policy making in authoritarian regimes is all the more pressing because so few others have spent time on the issue. It is worth taking a moment, however, to consider two rare articles that touch on trade policy making under autocracy. Frye and Mansfield argue that regime type is not as important an indicator of trade openness as the number of veto players over policy change.33 They find that, in post-communist Eastern Europe, both democracies and autocracies with more veto players also enjoyed freer trade. This link, they believe, is a product of incorporating a wider variety of voices into policy making, thereby reducing the ability of governments to depend on patronage to stay in power. While Frye and Mansfield make an important contribution to our understanding of how trade policy is made
31 32

Author 2006. Wright 2008b. 33 Frye and Mansfield 2003.


under autocracy, they focus their attention only on post-communist Eastern Europe and they do not address the role of regime stability. Our goal in this article is to take the next step by developing and testing a general theory of trade policy making in authoritarian regimes. In a similar vein, Milner and Kubota contend that, among developing countries, democracies will tend to choose freer trade policies than autocracies because democracy increases the power of labor interests. These interests, in a Stolper-Samuelson context, will be supportive of free trade in poorer, labor abundant countries.34 Empirically, Milner and Kubota find that personalistic dictatorships, with their smaller selectorates and weaker labor interests, have more closed trade policies than single party authoritarian regimes and democracies. Milner and Kubotas research has considerably expanded our understanding of trade policy in different regimes, and their findings go farther than any before in relating authoritarian variation to trade outcomes. That said, their research focuses primarily on the democracy / autocracy split and considers differences among authoritarian regimes themselves only as a robustness test. In our theory development, we focus entirely on authoritarian regimes and incorporate the concept of regime stability, something not considered by Milner and Kubota. We also develop a broader selectorate argument than they do, one which we believe should hold in both a StolperSamuelson and a Ricardo-Viner world. Finally, we look only at autocratic regimes in our empirical models, while Milner and Kubota use only pooled models. To summarize, therefore, we make and test two hypotheses: Hypothesis 1: Authoritarian regimes with larger selectorates (i.e. multiparty and, to a lesser extent, single party autocracies) will have more liberal trade policies than smaller selectorate authoritarian regimes (i.e. monarchies, non-party dictatorships, and military juntas), other things equal.

Milner and Kubota 2005


Hypothesis 2: More stable authoritarian regimes will have more liberal trade policies than less stable authoritarian regimes, other things equal.

Data and Methods In order to test the arguments presented in this paper, we estimate several cross-sectional timeseries models of autocracies. For robustness, we operationalize authoritarian regime type using two different datasets Hadenius and Teorell and Wright / Geddes.35 For our primary model, which uses the Hadenius and Teorell data, we include four dummy variables in the analysis Single Party, No Party, Monarchy, and Military and exclude multiparty regimes as our reference category. We expect each of these four variables to be associated with protectionism vis--vis multiparty autocracies, as our theory anticipates that multiparty regimes, with their relatively large selectorates, should have the most open commerce. For our robustness checks using the Wright / Geddes data, we include a dummy variable in our models measuring single party regimes (Single Party Wright), which we expect to be associated with more open trade vis-vis the remaining categories in the dataset (monarchy, military, and personalistic).36 To increase our observations, we extend the Wright dataset, which is itself an extension of Geddes37, from 2004 to 2007 using the same criteria for evaluating regime types. We also make use of the Party Number CGV variable, which is the lparty variable coded by Cheibub, Gandhi, and Vreeland, as an alternate measure of selectorate size.38 This variable measures the number

35 36

Wright 2008a; Hadenius and Teorell 2007. Note that the Wright/Geddes data do not code for multiparty regimes as a separate type, pooling most of them into

the single party variable. 37 Geddes 1999 38 Cheibub, Gandhi, and Vreeland 2010.


of parties is a countrys legislature and is coded 0 when there are no parties or no legislature, 1 when there is one party or multiple regime parties, and 2 when there are multiple parties. Our models using the Hadenius and Teorell data examine all autocracies from 1973 to 2006, whereas our models using the Wright / Geddes data include all autocracies from 1962 to 2007 (with 2005 to 2007 added by the authors). 39 Some observations are missing due to data availability, but we are still able to consider more than 2000 Ns in our most encompassing model. In order to exclude democracies from our sample, we omit any observation that is not coded as autocratic in Hadenius and Teorell for our models using those data, and any observation not coded as autocratic by Wright / Geddes for our models using those data. In both sets of models, we also omit autocratic regimes coded as mixed or other. Finally, we exclude all observations with one year changes in the countrys currency exchange rate of more than 2000% relative to the US Dollar. We do this to exclude extreme crisis years. To test our second hypothesis that the greater the level of stability in a country, the more liberal its trade policy will tend to be we measure the longevity of both the governing regime and the particular government in power. All of our models use measures of the duration of the particular authoritarian regime sub-type categorized above in a given country, with the expectation that within these regime types, transitions of power can happen in relatively peaceful manners that will not necessarily change governmental policy. For the Hadenius and Teorell models, we also look at the tenure of the particular leader or set of leaders in a country in order to test the idea that this stability may be directly tied to the leader, rather than the regime in general.


Note that, although it is relatively uncommon, some of the regime classifications in both the Hadenius and Teorell

and the Wright data overlap. So a country could, for example, be coded as both personalistic and military.


For the Hadenius and Teorell models, we use measures taken from that dataset. To measure regime stability, we use totdur1ny, which we term Regime Duration and which measures the total number of years that the regime type (multiparty, single party, no party, military, and monarchy, as above) has existed in the country, backdated to 1960. And to measure the duration of an individual leaders or governments term, we use tenure1ny (which we term Leadership Duration), coded as the total regime duration in years divided by the number of changes of the executive. For robustness, we also use data on leadership duration from the Archigos data coded by Goemans, Gleditsch, and Chiozza.40 This variable measures the lagged total leader years in power, and therefore (unlike the Hadenius and Teorell coding) varies across time for the same leader. For the Wright / Geddes models, we reconstruct the regime duration variable using the regime classification adopted by Wright / Geddes and the coding rules used by Hadenius and Teorell and call it Regime Duration Wright. There were insufficient data to compute the leadership duration variable for the Wright models. We lag all of our political variables by one year.

The Dependent Variable Measuring trade protection can be rather complicated and any measure has potential problems. In order to ensure the robustness of our results, we use measures that account for both trade volume generally (trade openness) and the trade policies of governments more specifically (import duty coverage ratio, average statutory tariffs, and open). For our primary dependent variable, we use trade openness to measure trade protection by looking at the outcome of policies and their effects on trade volume. This estimation of trade protection is measured by dividing the sum of a countrys imports and exports by its GDP. By

Goemans, Gleditsch, and Chiozza 2009.


looking at trade openness, we can see the impact not only of tariffs, but also of non-tariff trade barriers that can also be important determinants on the volume of trade. In addition, trade openness has the great advantage that data are available for more country-years than for any other measure. However, there are drawbacks to using a trade outcome variable to operationalize government policies. If we simply measure the level of a countrys international trade, we cannot necessarily discern whether higher levels are the result of government policies or general features of the country, such as wealth or region. For this reason, we include a number of control variables, mentioned below, in order to prevent spurious correlations between regime type and trade openness. These controls also help to distinguish the effects of changes in trade policy from broader economic shocks. Trade openness is a very common indicator used in the trade literature. The second metric that we use, import duty coverage ratio (IDCR), provides a direct measure of government policies with respect to trade. The IDCR is calculated by dividing the total value of import duties that a country collects by the total value of its imports. While IDCR cannot account for the effects of non-tariff barriers on trade, it is a straightforward, widely available, and well-respected measure of trade protection that directly accounts for government trade policies. We take the data for both trade openness and import duty coverage ratio from World Bank. 41 In addition, as a robustness test, we make use of a countrys average statutory tariff rates, the average level of tariffs across all categories of goods imported into a country. This variable corrects for potential problems with the IDCR measure by measuring trade protection independently of the overall levels of trade, so that variation in the volume of trade does not

World Bank 2008.


affect the assessed levels of trade protection. But we use this measure, which comes from World Bank (2003), only as a robustness test because the data are not available for many country-years. Our final indicator of trade policy, also used as a robustness test, is the open variable developed by Sachs and Warner.42 This is a dichotomous indicator, coded 0 for closed when any of the following hold: (1) NTB coverage is greater than 40%, (2) average tariffs are greater than 40%, (3) a black market exchange rate is depreciated by 20% relative to the official rate, (4) a socialist economy exists, or (5) there is a state export monopoly. The variable captures many different aspects of protectionism, but as a dummy variable it is quite blunt. In addition, it is only available from 1950 to 1992. To estimate our trade openness, IDCR, and statutory tariff models, we make use of random-effects regression, an approach that allows us to estimate more fully variation within and across panels in the dataset.43 Because many of our independent variables change little across time, a more robust fixed effects approach is not warranted. In addition, for both our trade openness and IDCR models, we employ an error correction model.44 By using this model, we solve the econometric challenge of non-stationarity by differencing our dependent variables. We also gain the advantage of including our control variables in both lagged form (to measure longterm effects) and differenced form (to measure short term effects). We include our primary variables only in lagged form because, as mentioned above, they change very little across time. As the statutory tariff variable does not trend, it is less critical to estimate it in an error correction format; there is no need to difference the variable to eliminate non-stationarity. In addition, differencing the variable would exacerbate the problem of missing observations, which is particularly serious with this variable. Therefore, we use a more standard random effects
42 43 44

Sachs and Warner 1995 Hsiao 1986. Baltagi 2000.


model for average statutory tariffs. For the open models, we use panel logit with random effects because the dependent variable is dichotomous. Following the normal specification of error correction models, we lag the measures of trade openness and import duty coverage ratios in order to control for autocorrelation. In our measure of statutory tariff levels, we control for autocorrelation using the xtregar function in Stata instead of lagging the dependent variable, because doing so would reduce our observations significantly due to missing data. We control for time effects in our open logit models with decade dummy variables. Below are summary statistics for the different metrics used in this study to measure the dependent variable (Table 1).

Insert Table 1

Control Variables In addition to the main independent variables used in the study, we include a number of lagged and differenced variables to control for potentially confounding factors. These controls include variables that measure government ideology, economic income, the results of external interactions, and regional variables. Both overall levels of national income and changes in a countrys economic situation can have a profound effect on many outcomes, including government trade policies. In our model, we include a lagged measure of a countrys overall GDP with the expectation that smaller countries are more likely to have an open trade policy. A measure of GDP per capita is included to account for development status, with the expectation that wealthier countries will generally be more inclined to have liberal trade policies. We also look at the change in GDP and GDP per


capita from one year to the next with the expectation that in times of low economic growth or economic retraction, governments will be more likely to adopt more restrictive policies than they would in more prosperous times. The data for these variables come from World Bank (2008). Using data from Beck et al. (2001), we also control for the ideological orientation of autocratic governments, although the impact of this variable on trade policy outcomes continues to be much debated in the literature. Because the relative value of a countrys currency internationally can significantly affect its trade competitiveness, we include a lagged measure of the yearly percentage change for each countrys exchange rate relative to the U.S. dollar. The data come from World Bank.45 Appreciation of a countrys currency can potentially make its exports products less competitive with foreign goods, thus increasing pressures for trade protection. We include a measure of the average trade protection in each states region to control for the effects of regional history and culture. We expect, in general, that countries that are in regions with higher levels of trade protection will have higher levels of protection themselves. We use average regional trade openness for the trade openness and open models, average regional IDCR for the IDCR models, and average regional statutory tariff for the statutory tariff models.46 Each of these variables changes across both regions and years. In addition, we look at foreign aid as a variable that potentially affects the trade policies of a country. In order to control for this effect, we include both lagged and differenced measures of foreign aid as a percentage of gross national income. The expectation is that countries with

45 46

World Bank 2008. In order to avoid taking the average of a dummy variable, we do not make use of a regional open variable.

Instead, we use average regional trade openness in the open models (Models 11 and 12 below), although the primary results presented in these models also hold when average regional IDCR and average regional statutory tariffs are used. Including an average of the open dummy would weaken but not entirely eliminate the results due to the very strong relationship between that average and the dependent variable.


high levels of foreign aid as a percentage of their income will have less restrictive trade policies, largely because of the free market conditions that may be attached to aid. In addition, increases in the levels of foreign aid as a percentage of income will generally lead to more liberal trade policies, whereas decreases will be more likely to result in more protectionist policies. These data come from World Bank.47 We include only the lagged levels of the above variables for the average statutory tariff and open models, as these are not error correction models with a differenced dependent variable. Finally, as a robustness check, we estimate trade openness models including variables for energy production and for democratic characteristics. The first of these variables, Lagged Energy Production, measures the total energy production of a country in kilotons of oil equivalent. 48 We include it to control for rentier state effects, as energy exporting autocracies may have incentives to adopt open trade policies to facilitate the purchase of consumer goods with their oil revenues. The second of these variables, Lagged Polity, is measured using the familiar polity dataset.49 We include it to control for the possible effects of the non-institutional democratic characteristics of these autocratic regimes, such as competitiveness and executive recruitment. Of course, this variable also picks up on institutional characteristics, so it should depress the significance of my primary variables. A summary of the statistics for the independent variables used in these tests and their expected effects on the level of trade protection are provided in Table 2 below.

Insert Table 2

47 48

World Bank 2008. World Bank 2008 49 Marshall and Jaggers 2000.


We present our results in Tables 3 and 4. Table 3 represents our findings using the differenced trade openness dependent variable, including both our primary model and robustness tests, whereas Table 4 represents our results using the differenced import duty coverage ratio, statutory tariff, and open dependent variables. Overall, our findings provide strong support for the hypothesized relationships discussed earlier between selectorate size and stability in autocracies on the one hand and trade policy on the other. First, as expected, multiparty regimes tend to have significantly more open trade polices than other forms of autocracy. Beginning with Model 1 from Table 3, our primary model, the monarchy, military, and single party variables are all significant and negatively signed, indicating that each of these regimes types are less likely to grow their trade volume than are multiparty autocracies, the reference category. The predicted effect varied with regime type and ranged from a 2.6% drop in differenced trade openness for monarchies (about half a standard deviation) to a 1.2% drop for military regimes. Turning to the tests of our second hypothesis, the duration of a regime has a strongly significant effect on changes in trade openness, with each additional year of survival accounting for a .074% increase in the level of trade openness in a country. The variable measuring a leaders duration in power was in the expected direction but not significant, indicating that regime type stability rather than leader tenure may be the key factor.

Insert Table 3

Models 2 through 7 present a series of robustness checks using differenced trade openness as the dependent variable. Model 2 makes use of the party number variable from the Cheibub, Gandhi, and Vreeland dataset rather than the Hadenius and Teorell regime type data.


The party number variable is indeed statistically significant in the expected direction, lending support to the first hypothesis. Model 3 returns to the Hadenius and Teorell data for regime type and regime duration, but substitutes in the Archigos data for leader duration. Unlike the Hadenius and Teorell variable, this operationalization achieves statistical significance, providing the first support for leader tenure as a factor in trade protection. Model 4 includes the control variable for energy production; despite the fact that roughly 600 observations and 30 countries are thereby excluded from the model, the primary variables remain robustly significant. Model 5 is a lowest common denominator regression that uses only observations that are also included in the import duty coverage ratio models. The idea here is to see whether the results are robust to excluding more than half of the observations. While the monarchy and military variables lose significance in this operationalization, the single party and regime duration variables are still significant in the expected direction, indicating that the results, while somewhat sensitive to different observations, are overall quite robust. Model 6 controls for the relative level of democracy found among these autocratic countries; the results remain strongly significant with this control, and the polity variable itself if insignificant. Finally, Model 7 uses the Wright / Geddes data for the regime type variables and our own regime duration variable computed from their data. As multiparty autocracies are subsumed in the single party category in this dataset, we expect single party regimes to be significantly associated with trade openness, as indeed they are. The regime duration variable, however, does not achieve statistical significance.

Insert Table 4


Table 4 presents our robust tests using differenced import duty coverage ratio, average statutory tariffs, and open as dependent variables. In Model 7, using differenced import duty coverage ratio, single party authoritarian regimes are found to be significantly more protectionist than multiparty authoritarian regimes, as expected. The other variables on regime type and stability are not significant. Model 8 uses the Wright / Geddes data to predict differenced IDCR. Here the primary variables are in the expected direction but do not achieve significance. The results for Models 9 and 10, which measure trade outcomes as the average statutory tariff levels in a country, are more robustly supportive. In Model 9, military regimes have significantly higher statutory tariff levels than multiparty regimes (about 8% higher, more than half a standard deviation), thus supporting our expectations. Likewise, single party regimes are found to have on average statutory tariff levels that are approximately 5.2% higher than those of multiparty authoritarian regimes. In addition, the regime duration variable is significant, with each year of regime survival, on average, resulting in statutory tariff levels that are .17% lower than in other regimes. Model 10 echoes these relationships with the Wright / Geddes data, finding support for both the regime type and regime duration variables. Taken together, these results provide very firm support for both of our hypotheses, especially as these models consider only about a quarter of the observations included in the primary model (541 and 421 observations). The final two models use the open dependent variable and a panel logit specification with random effects and decade dummies. Both of these models provide support for the hypotheses. Model 11 shows that both military and single party regimes are significantly less open than the multiparty reference category and that regime duration is associated with openness. Model 12 likewise shows a link between openness and both the single party Wright / Geddes variable (which includes multiparty regimes) and regime duration. It is interesting to note that running this


model with different combinations of the regime variables also provides evidence for the relative free-trading tendencies of other autocratic regimes, most especially monarchies. But the single party variable is the only one that is significant when included independently in the model. The results for the control variables in both sets of models are mostly as would be anticipated. There is evidence that leftist dictatorships are more protectionist, a finding that is consistent with what we know about communist autarky. Currency depreciation is significantly associated with increases in trade openness, growth in the receipt of foreign aid seem to reduce protectionism (perhaps a result of conditionality), and a countrys trade policy bears a general similarity to the trade policies of other countries in its region.50 There is also evidence that larger countries have more closed economies, not surprising as they are better able to produce a range of commodities domestically. Finally, the results indicate that richer autocracies are more open to trade. How robust are the results to changing some of the estimation decisions that we have made? Running the models without dropping observations where the countrys exchange rate shifted by more than 2000% vis--vis the dollar (i.e. those in extreme crisis) makes little difference in the significance of our variables. In the Hadenius and Teorell models, regime duration falls slightly below significance (p=.105) for the statutory tariff model and the one party variable fall slightly below significance (p=.110) for the IDCR model. Otherwise, for the trade openness and open models the primary results are unchanged or strengthened. Running the Wright /Geddes models with single party as the reference category and the others regimes (military, monarchy, and personalistic) included in the model leads to null results for the trade openness model but not for the statutory tariff model, where personalistic regimes are found to

The one exception is in the open models, where average trade openness is negatively associated with the

dependent variable. This may result from the existence of fairly liberal trading regions which contain states that trade less due to their large size (for example, North America).


be significantly more protectionist than single party regimes. This fact indicates that, for some but not all of the dependent variables, non-single-party regimes must be considered jointly for a full effect to be visible. On the other hand, as expected, running the Hadenius and Teorell models with only the multiparty autocracy variable included and the other variables as reference categories produces a statistically significant relationship between regime openness on the one hand and the trade openness, statutory tariff, and open dependent variables on the other. Running a fixed effects model without the regime type variables (which do not change enough over time to make such a model a reasonable choice) generally produces insignificant results for the regime and leadership duration variables. These results indicate that cross-sectional differences in duration are necessary for the effects of the variable to be clear; this fact is not very surprising as most of the variation in duration is also found across countries. Finally, we run regressions squaring the duration variables to test for a non-linear relationship to differenced trade openness. The idea is that young and old regimes may have shorter time horizons than middle aged regimes; young regimes may not be entrenched enough to ensure survival, whereas older regimes may be fragile due to age. While there is no evidence for such an effect in the Hadenius and Teorell model, the Wright / Geddes results do provide potential support for non-linearity in the effects of duration.

Conclusion In this paper, we apply insights from the political economy of trade to a large class of states that have been understudied autocracies. We draw on the current research in authoritarian variation coming out of comparative politics and connect it to a new and important policy area. Overall, our findings show strong support for our hypotheses linking institutionalization in authoritarian


regimes, through selectorate size and regime stability, with open trade policy. The evidence indicates clearly that authoritarian regimes do not behave similarly to one another with regard to their trade policies and that it is a mistake to consider such regimes as identical. Using the Hadenius and Teorell data, we find that multiparty regimes have significantly lower levels of trade protectionism than single-party autocracies, monarchies, and military juntas. The contrast with non-party regimes is statistically insignificant, but that may be because such regimes are relatively rare. As a robustness check, we also find significant, if somewhat weaker, support for our hypothesis regarding selectorate size when we use the Wright / Geddes data. In addition, we find evidence using both the Hadenius and Teorell and the Wright / Geddes data for our hypothesis that more stable regimes will, on average, have more liberal trade policies due to their longer time horizons. The effect of individual leader duration appears weaker, but there is some limited evidence of its importance. More broadly, our research indicates that scholarly understanding of the behavior of authoritarian regimes will need to be tied closely to an examination of their institutions. Perhaps the most fruitful arena for future research will be to focus on the specific preferences of selectorates in different types of autocratic regimes in an attempt to draw a link between selectorate composition and policy outcomes. 51 Such research could answer the question of how different formal institutions in autocratic systems mediate these preferences in the formation of policy. It could also shed light on the types of selectorates likely to exist in different types of authoritarian regimes. A deeper examination of these questions can extend our knowledge of how autocratic institutions mediate social and elite preferences in the development of policy in a wide variety of areas.


See, for example, Pepinsky 2008.


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Table 1: Dependent and Lagged Dependent Variables

VariableComputation MethodMeanRangeSt. Dev.Import Duty Coverage Ratio (differenced)(Total value of duties collected / value of imports) for year X (Total value of duties collected/value of imports) for year X-1-.0662-49.97 to 78.575.29Import Duty Coverage Ratio (lagged)(Total value of duties collected/value of imports) for year X-115.250 to 368.7024.95Statutory TariffAverage tariff level for all sets of goods22.250 to 102.214.78Trade Openness (differenced)100 * (Total value of all imports and exports/GDP) for year X 100 * (Total value of all imports and exports/GDP) for year X-1.8975-88.01 to 121.3610.79Trade Openness (lagged)100 *(Total value of all imports and exports/GDP) for year X-168.281.53 to 447.3041.04OpenCoded 1 if country possesses a open economy, based on NTBs, tariffs, exchange rates, and market


Table 2: The Independent Variables

VariableComputation MethodMeanRangeSt.Dv.ExpectationsMonarchy1 = monarchy (Lagged H&T data).14Dummy.34Negative Trade Openness & Open Positive IDCR & Statutory Tariff (vis--vis multiparty autocracy reference category)Military1 = military regime (Lagged H&T data).31Dummy.46Negative Trade Openness & Open Positive IDCR & Statutory Tariff (vis--vis multiparty autocracy)Single Party1 = single party regime (Lagged H&T data).25Dummy.43Negative Trade Openness & Open Positive IDCR & Statutory Tariff (vis--vis multiparty autocracy)No Party1 = no party regime (Lagged H&T data).06Dummy.24Negative Trade Openness & Open Positive IDCR & Statutory Tariff (vis--vis multiparty autocracy)Regime DurationLagged regime age in years (H&T data)21.941 to 4613.01Positive Trade Openness & Open Negative IDCR & Statutory TariffLeadership DurationLagged regime age divided by number of changes in current leadership (H&T data)12.93.5 to 349.26Positive Trade Openness & Open Negative IDCR & Statutory TariffSingle Party Wright1 = single party regime (Lagged Wright data).43Dummy.50Positive Trade Openness & Open Negative IDCR & Statutory Tariff (vis--vis other autocracries)Regime Duration WrightLagged regime age in years (computed by authors from Wright data)20.701 to 22325.69Positive Trade Openness & Open Negative IDCR & Statutory TariffParty Number CGVLagged parties in legislature 0=No parties (or no leg.), 1=1 party or multiple regime parties, 2=Multiple parties1.231.85440, 1, and 2Positive Trade Openness & Open Negative IDCR & Statutory TariffLeadership Dur. ArchigosLagged total leader years in power9.448.3699 to 46.428.231Positive Trade Openness & Open Negative IDCR & Statutory TariffLeftist Government1 = leftist government (Lagged).26Dummy.44AmbiguousLagged lnGDPLagged lnGDP22.6718.51 to 28.271.84Negative Trade Openness & Open Positive IDCR & Statutory Tariff lnGDPDifferenced lnGDP.037-.71 to .54.07Positive Trade Openness & Open Negative IDCRLagged GDP per capitaLagged GDP per capita224281 to 529434912Positive Trade Openness & Open Negative IDCR & Statutory Tariff GDP per capitaDifferenced GDP per capita11.75-7019 to 5772474Positive Trade Openness & Open Negative IDCRLagged aid as a % of GNILagged foreign aid as a % of gross national income7.95-.47 to 98.7410.69Positive Trade Openness & Open Negative IDCR & Statutory Tariff aid as a % of GNIDifferenced foreign aid as a % of gross national income.067-69.67 to 76.835.37Positive Trade Openness & Open Negative IDCRLagged aver. trade policy in


Table 3: Results of the Trade Openness Models

VariableModel 1Model 2Model 3Model 4Model 5Model 6Model 7ECM with RE (N=2086, 112 countries)ECM with RE (N=2086, 112 countries)ECM with RE (N=2029, 111 countries)ECM with RE (N=1440, 83 countries)ECM with RE (N=884, 88 countries) LCD with IDCRECM with RE (N=1991, 109 countries)ECM with RE (N=1654, 93 countries)Monarchy-2.61** (1.17)-2.83** (1.16)-2.17* (1.15)-2.51 (1.89)-2.96** (1.21)Military-1.22** (.565)-1.16** (.571)-1.17** (.592)-.744 (.856)-1.23* (.648)Single Party-1.91*** (.6673)-2.06*** (.675)-1.50** (.705)-2.50*** (.945)-2.13*** (.742)No Party-.2877 (1.14).083 (1.15).186 (1.41)1.52 (1.56)-.309 (1.13)Single Party Wright.969* (.582)Party Number CGV.775** (.308)Regime Duration.074*** (.028).041 (.025).077*** ***p<.01, **p<.05, *p<.10, =.105 All tests are 2-tailed. Standard errors are in parenthesis. (.026).064**


Table 4: Results of the IDCR, Statutory Tariff, and Open Models

VariableModel 7Model 8Model 9Model 10Model 11Model 12IDCR ECM with RE (N=962, 89 countries)IDCR ECM with RE (N=800, 76 countries)Statutory Tariff RE with ARI Correction (N=541, 84 countries)Statutory Tariff RE with ARI Correction (N=421, 69 countries)Open Panel Logit with Decade FE (N=899, 69 countries)Open Panel Logit with Decade FE (N=873, 65 countries)Monarchy.124 (.754)2.77 (4.36)4.35 (4.63)Military.367 (.406)8.04*** (1.68)-3.56*** (1.13)Single Party.835* (.492)5.23** (2.11)-4.14*** (1.47)No Party.034 (.772).277 (2.36)-2.30 (4.13)Single Party Wright-.047 (.415)-6.04** (2.74)3.41** (1.70)Regime Duration-.007 (.020)-.169* (.103).270*** ***p<.01, **p<.05, *p<.10 All tests are 2-tailed. Standard errors are in parenthesis.