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This paper examines the effects of foreign electoral shocks on currency markets. I develop a theory of signaling and uncertainty to explain why elections in countries with close economic ties should affect exchange rates. Methodologically, this paper focuses on several case studies, with the 2016 US election as a central case. I utilize an event analysis framework to measure the impact of the election on the Mexican peso by exploiting the plausible exogeneity of Donald Trump's tweets. I also measure changes in the peso using Trump's predicted chance of winning the election and show that the peso is weakest when Trump has the highest chance of winning the election. In addition, I include a series of robustness checks and analyses of other notable recent cases when electoral uncertainty affected currencies in other countries, including the 2018 Brazilian election. The results quantify the effect of foreign elections on exchange rates, building on the existing literature that focuses on how domestic elections shape currency markets. I conclude with a discussion of the external validity of the phenomenon demonstrated by the cases in the paper, charting future research on the topic and outlining ways to extend the findings.

This paper offers a theory of military retrenchment by states in relative decline. I argue that a declining state will choose to withdraw foreign military deployments and security commitments when there exists a suitable regional “successor” to which it can devolve its current responsibilities. The degree of a successor's suitability and the strategic importance of the region to the declining state interact to determine when and how rapidly retrenchment will occur. Importantly, this devolutionary model of retrenchment predicts significant variations in retrenchment patterns across a declining state's multiple regional commitments. It advances the literature by producing nuanced predictions of precisely where, when, and how quickly retrenchment will occur. This paper assesses the theory empirically through an examination of Great Britain's varying regional retrenchment strategies prior to World War I.

Some recent papers have concluded that authoritarian regimes have faster economic growth than democracies. These supposed growth benefits of autocracies are estimated using data sets in which growth rates rely heavily on data reported by each government. Governments have incentives to exaggerate their economic growth figures, however, and authoritarian regimes may have fewer limitations than democracies on their ability to do so. This paper argues that growth data submitted to international agencies are overstated by authoritarian regimes compared to democracies. If true, it calls into question the estimated relationship between government type and economic growth found in the literature. To measure the degree to which each government's official growth statistics are overstated, the economic growth rates reported in the World Bank's World Development Indicators are compared to a new measure of economic growth based on satellite imaging of nighttime lights. This comparison reveals whether or not dictators exaggerate their true growth rates and by how much. Annual GDP growth rates are estimated to be overstated by 0.5–1.5 percentage points in the statistics that dictatorships report to the World Bank.

Recent research suggesting that leader transitions increase the probability of war termination is based on the assumption that leader change is exogenous. However, the exogeneity of leader change needs to be tested, not assumed. This paper uses a bivariate discrete survival model to test the exogeneity of leader change and correctly estimate its partial effect on war termination. The paper extends the analysis by estimating a competing risks model of types of leader transitions. The evidence shows that leader change in large coalition systems never increases the probability of war termination, while leader change in small coalition systems never reduces the probability of war termination. In short, leader transitions in autocratic systems are more likely to bring interstate war to an end than leader transitions in democratic ones. The study also shows that the marginal effect of leader change fades away as the war progresses, and that war has negative duration-dependence.

Water scarcity is popularly associated with inter-state conflict, yet the academic literature also touts scarcity as an important variable for understanding cooperation over international freshwater. Building on studies that consider the relationship between scarcity and hydro-political cooperation, this paper empirically investigates why water treaties are negotiated for some rivers and between some riparians, and not others. Rather than considering a linear relationship between scarcity and cooperation, this study hypothesizes a curvilinear relationship expecting agreements to emerge in situations where scarcity is moderate rather than very low or high. Additional variables considered for understanding treaty formation include level of governance among the riparian states, prevailing power dynamics along the river, overall inter-riparian relations (measured by trade, diplomatic ties, and militarized disputes), and the geographical configuration of the entire river. The hypothesized curvilinear relationship between water scarcity and cooperation finds significant support in the empirical analyses. Governance, diplomatic relations, and trade are likewise found to be salient in explaining the levels of cooperation. The geographical configuration of the river was significant in only part of the estimates, and the militarized disputes variable was found to be insignificant across all models. Finally, while results confirm that cooperation may not depend on power asymmetries within riparian dyads, as suggested by some theories, the paper does find support for the contention that more developed states are in a position to provide incentives, such as financial transfers, to less-developed states so as to facilitate an international agreement.

This paper studies policy changes in capital taxation by focusing on policy interdependence induced by network dynamics at the international level. The empirical findings indicate that the competition mechanism induced by network position similarity in the network of portfolio investment and that of exports causes policy diffusion in corporate taxation; the socialization mechanism (policy learning and emulation) induced by network position proximity in the IGO networks also drives policy changes, and the evidence is much stronger in the IGO networks that facilitate policy learning than in those that facilitate emulation. The paper also discusses explicitly empirical challenges to incorporate network characteristics into connectivity matrices in spatial lag models often used to study policy diffusion. It suggests that students of policy diffusion should discuss as explicitly as possible the assumptions and procedures to construct connectivity matrices and present results from alternative specifications: our conclusion on the strength of policy diffusion is often sensitive to the choice of connectivity matrices.

This paper explores whether fixed exchange rate commitments and central bank independence have functioned more as institutional complements or as substitutes in achieving exchange rate stability. Focusing on the advanced industrial democracies in the post-Bretton Woods era, it argues that these two monetary institutions should have functioned in a non-complementary, but substitutable, manner with regards to this external policy goal. This argument is tested statistically using different measures of exchange rate variability and de facto exchange rate fixity. Finally, given evidence that fixed exchange rate commitments and central bank independence have not functioned as complementary institutions, this paper discusses why certain OECD (governments that are members of the Organization for Economic Cooperation and Development) governments nonetheless made fixed exchange rate commitments when their central bank was legally independent.

Several policymakers argue against negotiating with transnational terrorists because of the inability of terrorist groups to form credible commitments. To succeed in negotiation, terrorists must convince target governments that they are credible bargaining partners. This paper explores how constraints from host states affect the ability of terrorists to form credible commitments. If facing sufficient threats, host states may have an incentive to broker peaceful agreements. Hosts that have the ability to monitor and impose moderate costs on terrorist groups can increase the likelihood of negotiated settlements. The paper concludes with an empirical test of the model's hypotheses using data on transnational terrorism in the pre-9/11 period from 1968 to 1991.

This paper seeks to understand the relationship between state building, interstate and intrastate rivalry. Previous studies of state building have focused primarily on the European experience, with selective application to cases in the developing world. Prior studies of interstate rivalry have focused primarily on their effects on interstate relations. This paper seeks to expand the domain of both literatures. First, the paper investigates the applicability of the predatory theory of the state, derived from the European experience, in the context of the postcolonial developing world. Second, the paper expands interstate rivalry research to an examination of the effects of both interstate and intrastate rivals on domestic politics. In particular, the literature derived from the European experience considers decisions about fiscal policy as central to the process of state building and survival. Therefore, this paper examines the effects of internal and external rivals on extractive capacity in the context of state development in sub-Saharan Africa, the Middle East and North Africa, and Asia from 1975 to 2000. A series of pooled, cross-sectional time-series analyses suggest that external and internal rivals increase the extractive capacity of the state in a manner similar to the experience of early modern Europe.

This paper offers an exploratory analysis of the subnational dimension of income inequality, using data from the Luxembourg Income Study. The paper undertakes two basic tasks. First, it describes the results of calculations on household-level income data that produce indicators of intra- and inter-household inequality for 191 regions in 12 developed countries for the late 1980s and early 1990s, and for 149 regions in 8 countries for the mid-1990s. Second, the paper demonstrates the value of regional analysis by reexamining the relationship between electoral turnout and income inequality, an important substantive issue which has heretofore been explored almost entirely at the national or individual level but upon which regional-level analysis can shed valuable light.

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.

This paper examines whether democracy and other major characteristics of political institutions have any significant consequences for private investment. I isolate three political determinants that may affect property rights and private investment: political freedom, political instability, and policy uncertainty. The major findings in this paper can be characterized as follows: Political freedom promotes private investment, particularly through the channel of improving human capital formation. Political instability, as measured by the variability of political freedom, has a negative effect on private investment. Finally, policy uncertainty, as measured by the variability of government capacity, adversely affects private investment. These findings have been tested rigorously through using variables controlling for both domestic and international conditions.

In this paper, I argue that delegating diplomacy allows for credible diplomatic communication by constraining leaders’ ability to bluff. I show that leaders will optimally choose diplomatic agents who place value on the interests of their host countries. Such diplomats will only oppose foreign government policies when revision to those policies provides large benefits to the home country. Consequently, when diplomats transmit messages, this action indicates that the home country values the issue highly, increasing the likelihood of concessions. I show formally that the optimal diplomat is always biased towards foreign interests because the gain in credibility offsets the diplomat’s occasional failure to support the leader’s position. However, the optimal diplomat’s bias is constrained because leaders will choose to preserve some ability to bluff. As an illustration of the results, I discuss Anglo-American diplomacy during the Wilson administration, focusing on the role played by Ambassador Walter Hines Page.

This paper analyzes the relationship between inward foreign direct investment (FDI) and corruption. Previous studies report a negative eect of corruption on FDI inows; yet inward FDI has the potential to aect corruption levels in the host countries. We argue that the eects of FDI on corruption are conditional on the host country’s underlying economic and political climate. The underlying structure of the economy determines the possibility of extracting rents that could distributed among foreign investors and the incumbent. Political development, on the other hand, determines the level of accountability of the incumbent, and hence creates a check on the incumbent’s ability to appropriate those rents, and the probability of getting caught and sanctioned for engaging in corrupt behavior. Hence, in more democratic polities with a diversied economy, FDI inows are likely to be associated with lower corruption. In non-democratic countries with less diversied economies, a rise in FDI inows are more likely to be associated with higher corruption levels. Most empirical attempts to estimate the relationship between FDI and corruption overlook the latent endogeneity problem. We, on the other hand, construct an instrument for inward FDI per capita using a measure of remoteness, namely a weighted average of the geographical distance between the host country and the richest economies in the world. Ancillary tests suggest that the instrument -which is loosely related to a gravity model of investment- is strong and valid. We test our hypotheses on the conditional eects of FDI on corruption in a two-stage least-squares setting. Controlling for other factors identied in the extant literature as determinants of corruption, such as legal systems, religion, ethnolinguistic fractionalization, and national resources endowments, we nd preliminary support for our hypotheses of the conditional eect of FDI. The eect of FDI on corruption is positive in authoritarian and poor countries, and turns negative as countries develop and become more democratic. Yet we also nd that the absolute eect of FDI on corruption in democratic and rich countries is smaller.

When do countries abandon coalition partners during war? Prominent arguments about alliance dissolution focus on peacetime, yet the ability of alliances to inuence international politics ultimately hinges on their cohesion or dissolution during war. In this paper, I argue that battleeld circumstances heavily inuence the likelihood of defection from coalitions. First, countries ghting independently from their partners make attractive candidates for wedge strategies and hence are more likely to defect. Second, coalitions are more likely to collapse when it appears less likely that the coalition will triumph in the war as a whole. I test hypotheses about wartime developments statistically using new time-varying data on both front-level troop contributions and battle deaths. Consistent with theoretical predictions, countries are more likely to abandon coalition partners if they are ghting alone and when the coalition has fared worse in recent ghting.

In this paper, I conduct the first cross-national study of the political economy of gratuities. Existing efforts to explain cross-national variations in tipping either approach this topic from a social-psychological or an economic perspective. In contrast, I argue that the diffusion of American tipping norms contributes to cross-national tipping patterns and that visits by foreign travelers to the United States are the central path through which these norms spread overseas. Consistent with this argument, I find that non-immigrant admissions to the United States are strongly and positively linked to restaurant tipping rates. Further, increases in such admissions have spurred a rise in tipping rates. From the standpoint of the domestic political economy, various observers argue that patrons leave larger tips in poorer countries and countries marked by poor labor conditions. However, my results provide little indication that these factors directly bear on cross-national tipping patterns. Instead, the existence of a service charge constitutes the only domestic factor that directly affects tipping rates.

We develop and test a theory, based on the Stolper–Samuelson Theorem, of the effectiveness of sanctions. We treat sanctions as exogenously imposed changes in a country's exposure to international markets. In a country with an open-trade regime, owners and intensive users of the abundant factor of production hold economic and political power. In a country closed to trade, however, economic and political power rests with owners and intensive users of scarce factors. Thus, if real rates of return to the abundant factor decline during sanctions against a trade-open country, or real rates of return to the scarce factor decline during sanctions against a trade-closed country, we expect these economically and politically powerful segments of the targeted country to push hard for policy changes that would bring about an end to sanctions. Statistical analysis of sanctions episodes initiated between 1971 and 2000 provides support for the paper's expectations.

Traditional bargaining theory predicts that groups will demand and concede as much as their relative power allows. However, scholars who study bargaining in the civil war context suggest that governments often overcompensate a rebel group to reach an agreement because the rebel group typically feels insecure. This paper argues that depending on the relative power distribution between groups, either a rebel group or government involved in a civil war can feel insecure at the bargaining table. The weaker bargaining participant, whether government or rebel, is expected to feel insecure and thus demand more political power in a postwar state than its power share predicts, while the stronger group is expected to be willing to overcompensate the weaker group to assuage its security concerns. Using a new data set on political power-sharing bargaining during civil war, my analysis supports this expectation.

In this paper, we provide one of the first systematic analyses of gender's effect on trade attitudes. We draw on a unique representative national survey of American workers that allows us to evaluate a variety of potential explanations for gender differences in attitudes toward free trade and open markets more generally. We find that existing explanations for the gender gap, most notably differences between men and women in economic knowledge and differing material self-interests, do not explain the gap. Rather, the gender difference in trade preferences and attitudes about open markets is due to less favorable attitudes toward competition among women, less willingness to relocate for jobs among women, and more isolationist non-economic foreign policy attitudes among women.

This investigation was financially supported by the University of Kansas General Research Fund. Why do multiparty cabinets in parliamentary democracies produce more extreme foreign policies than single-party cabinets? Our paper argues that particular institutional and psychological dynamics explain this difference. We test this argument using a global events data set incorporating foreign policy behaviors of numerous multiparty and single-party governments. We find that more parties and weak parliaments promote extremity in coalitions, but parliamentary strength has the opposite effect for single-party governments. This study challenges existing expectations about the impact of democratic institutions on foreign policy. Postprint

This paper argues that the effects of war as a performance issue in elections are different for a right-wing than a left-wing leader. War is consistent with the reputation of right-wing, hawkish governments, but does not fit the reputation of left-wing, dovish governments, and necessitates a turn away from the domestic issues the public expects left-wing governments to prioritize. War therefore varies in its effects on perceptions of right-wing and left-wing leaders. War also provides more temptation for left-wing supporters to defect to the incumbent under a right-wing government than for right-wing supporters to defect under a left-wing government. The War in Iraq and elections in the United States and UK provide a unique case to test these arguments. The results confirm that Blair paid a higher political price as a left-wing leader, because perceptions of Blair's trustworthiness became central to evaluations of him. Conversely, positive perceptions of strength became central to evaluations of Bush as a right-wing leader. The war also had asymmetric effects on supporters of the opposition party in the UK that resulted in higher costs to Blair. These findings imply that the risks of going to war are greater for left-wing leaders.

This paper argues that the foreign direct investment (FDI) data commonly used to test political science theories about FDI often diverge from the theorized about phenomena in ways that can introduce bias and complicate hypothesis testing. I describe some of the key conceptual issues surrounding the quantification of FDI, how commonly used data deals with these issues, and the extent to which those coding rules allow or prevent these data from speaking to political science theories. I show that the empirical relationship between democracy, political risk, and multinational corporations behavior is significantly impacted by “getting the measure right.” I conclude by arguing that political science theories about FDI speak to such a wide variety of empirically and conceptually distinct phenomena that conflating them as “FDI” does a disservice to the complexity of the topic.

Democratic foreign policy choices are a function of expected international outcomes and the preferences, power, and information of domestic actors. Studies of domestic political competition and international crisis bargaining have argued that an opposition's policy positions send credible signals of the government's intentions to adversarial target states. This paper contends that while opposition behavior may send informative signals, it can also directly constrain the policy options of the government. We relax previous assumptions that the opposition cannot directly prevent war or influence the outcomes of war (Schultz 2001). Instead, we assume that the opposition controls some political resources and attempts to influence the government's policy decisions in a way that advances its own partisan interests. To empirically demonstrate the theoretical differences in our model in comparison with previous domestic opposition models, we examine the case of the Quasi-War of 1798 between the United States and France.

This paper examines how the circumstances of democratic transition affect the consequences of losing office for outgoing dictators. Using data on constitutional origins and democratization from 1875 to 2004, we find that outgoing dictators who are able to impose a holdover constitution during democratization and beyond are less likely to face severe punishment upon relinquishing their rule. These results hold after accounting for alternative explanations of autocrats' post-tenure fate and after using instrumental variables to adjust for potential endogeneity. We also document several mechanisms by which this occurs: proportional representation, the election of right-wing executives, post-transition military influence, and elite control over local politics. The findings suggest that for dictators who fear their ousting in the face of domestic unrest or potential instability, democracy can provide a plausible avenue for protecting their most basic interests.

This paper argues that banks operating in systems where monetary and regulatory authority are unified in a central bank expect and receive preferential monetary policies, and so act less prudently than do banks in non-unified systems. These incentives arise when the natural tension between counter-cyclical monetary policy and pro-cyclical regulatory policy is resolved in ways that benefit the banking sector. I test the hypothesis using time series cross-sectional regression models that exploit two types of policy interventions—accession to the European monetary union, and several reassignments of domestic regulatory authority—within OECD countries from 1992 to 2009, the period during which the international Basel accords harmonized key aspects of national regulatory standards. The results strongly support the claim that there is a relationship between risk behaviors of banks and the location of regulatory and monetary authority.

Scholarly work on the impact of domestic politics on international cooperation has grown significantly over time. Unfortunately, there is a democratic bias to much of this literature as scholars typically focus on the relative advantage of democracies at cooperation. Our paper seeks to shed more light on the cooperation potential of autocracies by distinguishing different types of autocratic regimes. We argue that autocracies that more closely resemble democracies in the institutional characteristics that have been found to be important for cooperation (that is, greater leader accountability, limited policy flexibility, and greater transparency) should be more successful at cooperation and thus more likely to cooperate with one another and with democracies. Specifically, we expect single-party and military regimes to be advantaged at international cooperation compared to personalist systems. We test our theoretical expectations using the 10 Million International Dyadic Events data (1990–2004) and find support for our theoretical argument.

Who do citizens blame for the recent European economic crisis? In this paper, we test theories about blame attribution with respect to the economic crisis. We argue that blame for the crisis is partially conditioned by partisan bias and framings of the crisis as being related to globalization. We test the argument with new survey data and a survey experiment from Spain. In the experiment, respondents receive different framings of the economic crisis which are endorsed by different political parties and non-partisan organizations. We obtain the following findings: (i) blame for who is responsible for the economic crisis is greatly affected by partisanship; (ii) making globalization as a cause of the crisis salient exonerates the government of blame, but only for co-partisans of the government; and (iii) citizens are willing to blame other globalization-related factors for the crisis, in particular, European governments and blame the domestic government less. The results expand our understanding of public opinion dynamics during major economic recessions and also suggest conditions under which >scapegoating> globalization can occur. © 2013 International Studies Association.

International relations scholars have previously argued that states facing budget constraints will join alliances to free resources for domestic spending. In this paper, we focus on the primary mechanism by which leaders have relaxed this constraint: sovereign borrowing. Sovereign debt enables states to maintain stable tax rates while increasing expenditures to confront budgetary emergencies. Affordable access to credit, then, serves as both a source of power and an important buffer between security and the political consequences of fiscal policy. States that lack the confidence of investors must make tough choices between continued security and their electoral fortunes. We suggest that as governments lack access to affordable credit, they will substitute military capacity with alliance formation. Alliances provide a means for leaders to offset the loss of flexibility from diminished access to credit without disturbing the domestic political economy. Using previous models of alliance formation as a guide, our empirical evidence indicates that states that have a hard time borrowing are more likely to form an alliance than those states with affordable access to credit markets.

This paper argues that a fundamental failing in the debate on the decline of American economic power is not taking globalization seriously. With the rise of transnational corporations (TNCs), transnational modular production networks, and the globalization of corporate ownership, we can no longer give the same relevance to national accounts such as balance of trade and GDP in the twenty-first century as we did in the mid-twentieth. Rather, we must summon data on the TNCs themselves to encompass their transnational operations. This will reveal, for example, that despite the declining global share of United States GDP from 40% in 1960 to below a quarter from 2008 onward, American corporations continue to dominate sector after sector. In fact, in certain advanced sectors such as aerospace and software—even in financial services—American dominance has increased since 2008. There are no serious contenders, including China. By looking at the wrong data, many have failed to see that American economic power has not declined—it has globalized.

This paper analyzes whether and to what extent countries reconstitute the rule of law following civil conflict. Drawing on an original data set of 47 cases in which conflict ended between 1970 and 1999, we find that the cessation of conflict has at best a modest effect on the rule of law. On average, countries revert to the pre-conflict rule-of-law status quo ante. In simple models, rule of law prior to the onset of conflict is the best indicator of post-conflict performance. Analysis of individual cases using structural break analysis shows that the cessation of conflict is not typically associated with an inflection in the rule of law; improvements are modest, take a long time, and fall far short of plausible thresholds for robust rule of law.

While space capabilities were once concentrated among a handful of leading powers, an increasingly large number of states have gained access to them. As of 2007, 58 countries possessed dedicated civil space programs, 44 countries had placed nationally-owned satellites into orbit, and 9 countries had achieved domestic space launch capabilities. To date, however, no systematic inquiries have ever been conducted into which countries acquire space capabilities and why. Within this paper, I develop an explanatory account that explores both the capacity-based factors and political motivations that influence countries’ acquisition of space capabilities. I test my hypotheses via a quantitative analysis of the factors affecting 143 countries’ acquisition of civil space programs, satellite capabilities, and space launch capabilities from 1950-2002, which I augment with a case study of Israel’s space program. My findings shed new light on the primary causes of global space proliferation and have a number of important policy implications.

Most research on the effects of international migration on democratic institutions in sending countries focuses on how emigration changes the civic and democratic values of those left behind. Little attention has been given to how the additional income provided by migrant remittances alters the incentive structure of the political actors involved and how this will affect political outcomes. This paper develops a voting model that accounts for the effect of higher income through remittances and shows that its expected effects on voter turnout patterns differ in important ways from those of improved civic values. Taking these predictions to the data, it is shown that, for the case of Mexican municipal elections over the year 2000–2002 period, the empirical evidence strongly supports the notion that international remittances had a positive effect on electoral competitiveness in Mexico by reducing the clientelistic power of the formerly dominant state party (Institutional Revolutionary Party). This result is robust to the use of instrumental variables.

This paper examines the relationship between economic globalization, factor mobility, government partisanship, and the relative budgetary salience of two different instruments of compensation policies: social welfare spending and industrial subsidy provision. While welfare spending directly benefits labor, industrial subsidies benefit both capital owners and labor along the sectoral line. Based on both factoral and sectoral models of trade, we theoretically argue and empirically show that governments are more likely to use welfare politics as compensation policies if free trade generates class-based interests in the society, and subsidy politics if trade openness promotes industry-based interests. We also argue that the interactions of the three variables are contingent on government partisanship. When non-class-based interests are salient as a consequence of trade openness, left-wing governments are likely to focus on welfare politics while right-wing governments favor provision of subsidies. However, when class-based interests are salient, even right-wing governments behave similarly to left-wing governments, favoring welfare spending over subsidies as the key compensation policy. In the analysis of compensation policies in the OECD countries between 1980 and 2001, the test results confirm our expectations.

Proponents often recommend high labor standards as a means of reducing inequality between and within countries. Opponents suggest that labor standards exacerbate international and domestic inequalities. In this paper, we forward a simple argument whereby the impact of higher labor standards on domestic inequality depends on a country's labor endowment. We hypothesize that where labor is abundant, higher standards will exacerbate inequality. Where labor is scarce, higher labor standards might lower inequality. In both cases, the impact of labor standards on inequality work through an employment and wage effect. Using newly available data on labor standards around the world from 1981 to 2000, we provide evidence largely consistent with our hypotheses. Higher labor standards do, indeed, exacerbate inequality in labor-abundant economies. On the other hand, higher labor standards lower inequality in labor-scarce economies. We discuss the implications of these findings for work on labor market insiders and outsiders as well as the political economy of development.

This paper examines the question of whether a country's exchange rate policy choices are influenced by membership in preferential trade agreements (PTAs). We argue that PTAs, by constraining a government's ability to employ trade protection, increase its incentives to maintain monetary and fiscal autonomy in order to manipulate the domestic political economy. Consequently, we contend that countries are less likely to adopt or sustain a fixed exchange rate when they have signed a PTA with their “base” country—the country to whom they have traditionally fixed the currency or the major industrial country to whom they have the most extensive trade ties. Likewise, countries that have signed a “base” PTA also tend to have more depreciated/undervalued currencies, as measured by the level of the real exchange rate. Using data on 99 countries from 1975 to 2004, we find strong support for these hypotheses. These findings shed light on the complex relationship between different types of macroeconomic policies in the contemporary world economy. More broadly, they speak to the question of whether international agreements are credible commitment mechanisms when close policy substitutes exist at the domestic level.

This paper analyzes multilateral aid allocation in the European Union (EU). We argue that EU members can influence the aid allocation process toward their national interests if they form powerful coalitions that bias the European Commission's development policies. When EU members' preferences over aid allocation are heterogeneous, the Commission can implement multilateral aid according to its programmatic goals. Greater homogeneity of EU members' goals, however, increases the likelihood that members can form powerful interest coalitions and induce the Commission to allocate aid according to their own national interests. The empirical analysis provides robust support for our theoretical argument, and the findings generally indicate that interest coalitions play an important role in multilateral aid allocation.

Political scientists have examined how domestic politics and the competition for international capital affect the setting of national tax rates. In this paper, I explore how political institutions, specifically the level of democracy, affect firm-level taxation across the world. I argue that electoral competition leads democratic governments to higher levels of taxation on firms. Using a data set on firm tax payments on the foreign affiliates of US multinational corporations from the US Bureau of Economic Analysis, I show that there are large variations within countries on the tax burdens faced by firms that are not explained by national tax rates. I find evidence that the mobility of the specific investment project, the types of spillovers these investments provide to a community, and attributes of the parent firm are all important determinants of taxation. While firm-level factors clearly affect corporate taxation, I argue that democratic institutions limit the offering of tax incentives and generate electoral benefits to policing tax avoidance by multinational corporations. After controlling for parent firm and foreign affiliate�level factors, I find that democratic countries generate as much as 26% more tax revenues from multinational corporations relative to authoritarian countries.

Liberal international relations theory suggests that mutual gains from trade prevent conflict between states. Previous research has focused predominately on international outcomes, especially the occurrence of militarized conflict between pairs of states. How concerns about welfare gains from trade help produce the policy choices leading to these outcomes is less well understood. This paper examines the influence of economic interests arising from international trade on the policy-making process at the domestic level. If the benefits of trade increase the opportunity cost of conflict, then support for a harmonious foreign policy should be strongest among trade�s domestic beneficiaries. Those whose income is diminished by trade have no reason to favor a friendly foreign policy and might even prefer a hostile alternative. We test whether the domestic distributional effects of trade affect support for hostile foreign policies toward China among representatives in the US Congress. An analysis of cosponsorship and roll-call voting suggests that the export orientation and import sensitivity of their districts influences members� positions on measures that criticize Chinese policies or treat the country as a security threat.

Nonstate actors, such as international non-governmental organizations (INGOs) and multinational corporations (MNCs), have attained an increasingly prominent role in modern world affairs. While previous research has focused on these actors� respective interactions with states, little attention has been paid to their interactions with each other. In this paper, we examine the extent to which the decisions of private actors seeking to invest abroad are affected by the reputational costs of doing business in countries publicly targeted by human rights activists. We find that ��naming and shaming�� by human rights INGOs tends to reduce the amount of foreign direct investment received by developing states, providing evidence that INGO activities affect the behavior of MNCs. An additional implication of our findings is that shaming by INGOs can impose real costs on targeted states in the form of lost investment.

Over the last few decades, a vast 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 policymaking 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 autocratic regimes with larger “selectorates” should have greater 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).

Olson hypothesized that a latent group's ability to organize and contribute toward providing a public good might be jeopardized by free riding. The politics of trade protection feature the collective action problem, since protection benefits all firms in the industry including those who contributed nothing to attaining it. This paper examines the extent of free riding in lobbying over tariffs in the context of the [Grossman and Helpman (1994)][1] protection-for-sale model in which industry lobbies seek to bend government policy in their favor. Previous investigations of the model have produced the puzzling result that governments are largely welfare-maximizing and care little about campaign contributions, in contrast to numerous examples of welfare-reducing policies that have in fact been bought cheaply by special interests. We think the result arises because the model assumes away free riding by firms which hinders industry's ability to organize politically. We introduce free riding into the Grossman–Helpman model, allowing industries to be partially organized. Using a new data set on US trade barriers, we test the model using estimation methods new to this literature. The estimates support the model's predictions and reveal that the extent of free riding by manufacturing firms can help resolve the puzzling result. [1]: #ref-20

Fails, Matthew D. (2012) Inequality, Institutions, and the Risks to Foreign Investment. International Studies Quarterly, doi: 10.1111/j.1468-2478.2012.00725.x © 2012 International Studies Association Income inequality is frequently given a central role in explaining diverse political outcomes, but the specifics of how, when, and under what circumstances inequality really matters are far from clear. This paper addresses these questions by examining whether greater levels of inequality raise the risk of expropriation associated with foreign investment. The results demonstrate that inequality matters in two distinct ways. First, inequality elevates risk, although consistent with the argument developed herein, the effect is strongest when chief executives face high constraints on their decision making. Second, inequality mitigates the otherwise protective influence of political institutions on the risk of expropriation. The findings are robust across a variety of estimation strategies, including instrumental variable procedures that correct for error in the measurement of inequality. The findings provide new insights regarding the determinants of foreign investment while simultaneously resolving one part of the contested literature describing inequality’s role in the political economy of development.

Tyburski, Michael D. (2012) The Resource Curse Reversed? Remittances and Corruption in Mexico. International Studies Quarterly, doi: 0.1111/j.1468-2478.2012.00721.x © 2012 International Studies Association Do remittances increase corruption in recipient states? Previous research suggests that remittances allow governments to maintain policies that create corrupt state–society relations. In contrast, this paper argues that remittances mitigate corruption by increasing government accountability and providing other incentives to reform. Using data from Mexico in 2001–2007, this study shows that corruption trended downward in states receiving larger remittance sums, after controlling for political competition, divided government, and market openness. The results are robust to instrumental variable analysis testing for potential endogeneity between corruption and migration. These findings bring attention to remittances as an exogenous resource for reform-minded groups and suggest that they may operate as the converse of the resource curse.

How does party politics influence trade outcomes? Previous studies offer a limited understanding of the role of political parties in trade policymaking due to their restrictive assumptions that downplay the distinct organizational identity of political parties and the competitive logic of their interactions. This paper develops a theoretical argument that emphasizes the competitive forces of party politics as a key determinant of party preference for trade and hence of trade outcomes. This theoretical argument is illustrated and tested in analysis of the trade implications of strategic interactions between mainstream parties and niche parties. The empirical analyses confirm that party strategic factors need to be assigned a substantial analytical weight in explaining trade outcomes.

In this paper, we investigate how international law shapes leaders' decisions regarding the use of force in the context of territorial disputes. We argue that if the legal principles relevant to the dispute are capable of suggesting a focal point, international law will have a powerful role to play in informing leader behavior. Specifically, if a focal point exists, the state that it favors will avoid using force and prefer negotiations when considering an initial challenge to the status quo. However, we expect focal points to have the opposite effect once states are involved in a militarized dispute. Under these circumstances, the state with a legal advantage will be more likely to escalate the level of military force. Using a series of statistical tests, we find strong support for our theoretical argument.

This paper adopts and develops the "fear of floating" theory to explain the decision to implement a de facto peg, the choice of anchor currency among multiple key currencies, and the role of central bank independence for these choices. We argue that since exchange rate depreciations are passed-through into higher prices of imported goods, avoiding the import of inflation provides an important motive to de facto peg the exchange rate in import-dependent countries. This study shows that the choice of anchor currency is determined by the degree of dependence of the potentially pegging country on imports from the key currency country and on imports from the key currency area, consisting of all countries which have already pegged to this key currency. The fear of floating approach also predicts that countries with more independent central banks are more likely to de facto peg their exchange rate since independent central banks are more averse to inflation than governments and can de facto peg a country's exchange rate independently of the government.

It is well known that during a crisis, unitary rational states have an incentive to misrepresent their true resolve and willingness to go to war. This theoretical result has been taken to imply that diplomacy, interpreted as pre-bargaining communication, can have no effect on the way crises play out. This paper shows an intuitive way that diplomatic cheap talk can matter in a single crisis between countries, especially when the bargaining game has multiple equilibria. In particular, if after “diplomacy” states can choose to either fight a war directly or bargain in hopes of reaching a peaceful settlement, then it is possible to find an equilibrium, where diplomacy influences whether there is war or peace. Importantly, the cheap talk diplomacy does three things the standard model says it cannot: it coordinates actions, it reveals information, and it changes the ex ante probability of war. This result demonstrates an easy way of reconciling the discrepancy between the obvious empirical observation that diplomacy often does influence the path of a crisis with the rationalist model of war.

Military leaders, policymakers, and academics have long debated the relative merits of volunteer versus conscript armies. They also have studied the possible effects of eroding resolve among mass publics in democratic states during wartime. In this paper, we use battlefield casualty data from the population of interstate wars to compare theories of property takings and domestic institutions. We find conscription, like other non-market-based property takings, to be a wasteful means of mobilizing military manpower. Volunteer armies suffer far fewer casualties than their conscripted counterparts. We also find that this effect compounds when interacted with regime type. Volunteer democratic armies suffer especially few casualties. Finally, we find that democratic societies are willing to bear the costs of large-scale commitments to maintaining state sovereignty and survival when targeted by authoritarian states, at times in the face of certain defeat.

This paper argues that the construction of sustainable peace settlements among great powers rests on a self-enforcing international bargain that impedes rapid shifts in the global distribution of military power and a series of stable fiscal bargains within great powers that both generate sufficient revenues to preserve a military deterrent and prevent programs of rapid armaments expansion. It examines how free resources— public property, natural resource wealth, international transfers, and sovereign lending—insulate governments from having to renegotiate the basic fiscal contract with society and can, as a consequence, create the domestic political capacity to sustain arms races and shift regional and global military balances to their advantage. These claims are examined by comparing the origins of World War I and the Cold War. The reexamination of World War I challenges the prevailing historical consensus by arguing that the primary cause of war lies within Russia rather than Germany. A discussion of early stages of the Cold War shows how the Truman and Eisenhower administrations both considered launching preventive war to solve the same fiscal dilemma faced by German leaders in July 1914.

Most bargaining models of war suggest that the absence of ex-ante uncertainty about the outcome of fighting should lead to negotiated outcomes rather than military conflict. Nevertheless, relatively weak states still refuse demands from dominant powers in many cases. This paper tests several explanations for this phenomenon. James Fearon's account of rationalist explanations for war suggests two reasons states might resist militarized demands even if there is little or no chance of military victory. First, the weaker state might not concede if the stronger state's threat is not credible. Second, guerrilla resistance to enemy occupation might create a commitment problem for the stronger state if it could impose costs that exceed the value of the stronger state's objectives. Alternative explanations that do not assume the state behaves as a unitary rational actor focus on special features of state preferences, such as the importance attached to political sovereignty and territorial integrity, or on the difficulties state institutions might pose for making the policy changes necessary to concede the more powerful state's demands. Empirical analyses of MID and ICB data point to the importance of both rationalist claims about threat credibility and alternative arguments about state preferences.