Robert Gold (Kiel Institute, RA "Knowledge Creation and Growth")
We explore whether democratization fosters international economic integration – or vice versa. We focus on the political and economic development of selected low-income countries. During Cold-War-times, these countries were aligned – but not formally allied – to either the Soviet Bloc, or the West. With the brake-down of the Soviet Union, the former unexpectedly lost their main trading partner, and had to integrate into the (Western) world economy as a consequence. We exploit this exogenous shock to the trade environment in diff-in-diff framework. It turns out that the need to integrate into the world economy causes democratization. The economic impacts are less clear-cut.
Julian Donaubauer (Helmut Schmidt University, Hamburg) — Robert Gold (Kiel Institute)