2023
Working Paper
HBS Working Paper Series

Economic Integration and the Transmission of Democracy

By: Marco Tabellini and Giacomo Magistretti

Format:Print
| Language:English
| Pages:132

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 economic integration. We find that economic integration with democracies increases both citizens’ support for democracy and countries’ democracy scores, whereas economic integration with nondemocracies has no impact on either attitudes or institutions. The effects are stronger when democratic partners have a longer history of democracy, grow faster, spend more on public goods, are culturally closer, and export higher quality goods. They are also driven by imports, rather than exports, and by integration with democratic partners 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 economic integration favoring the transmission of democracy by signaling the (actual or perceived) desirability of the latter.