Economic Integration and the Transmission of Democracy

Abstract:

In this paper, we study the effects of economic integration with democracies on individuals’
democratic values and on countries’ institutions. We combine survey data with
country level measures of democracy from 1960 to 2015, and exploit improvements in air,
relative to sea, transportation to derive a time-varying instrument for trade. We find that
economic integration with democracies increases both citizens’ support for democracy and
countries’ democracy scores. Instead, trade with non-democracies has no impact on either
attitudes or institutions. The effects of trade with democracies are stronger when partners
have a longer history of democracy, grow faster, spend more on public goods, and are
culturally closer. They are also driven by imports, rather than exports, and by integration
with partners that export higher quality goods and that account for a larger share of a
country’s trade in institutionally intensive, cultural, and consumer goods as well as in
goods that involve more face-to-face interactions and entail higher levels of bilateral trust.
These patterns are consistent with trade in goods favoring the transmission of democracy
by signaling the (actual or perceived) desirability of the latter. We examine alternative
mechanisms, and conclude that none of them can, alone, explain our findings.