Working Papers

Kim, In Song, et al. Working Paper. “Firms’ Preferences over Multidimensional Trade Policies: Global Production Chains, Investment Protection and Dispute Settlement Mechanisms”. Stable URLAbstract

In addition to the conventional focus on market access, recent trade agreements have included investment protection, dispute settlement mechanisms, and escape clauses that enhance flexibility. We argue that preferences over these newly salient dimensions of trade policy will vary by firm, not by industry, and that a firm’s preferences will depend on its insertion into global production networks. To estimate a firm’s preferences over multiple policy dimensions, we conduct a conjoint experiment on firms in Costa Rica, a middle-income democracy in the developing world. We find that investment protection is the most salient trade policy dimension for firms who are most deeply integrated into global production networks. In addition, strong dispute settlement procedures are most valued by exporters who are not central to global supply networks. Furthermore, we find few differences across industries, thus challenging the conventional focus on inter-industry distinctions in the trade policy literature.

de la Cuesta, Brandon, et al. Working Paper. “Taxation without Representation? Experimental Evidence from Ghana and Uganda on Citizen Action toward Taxes, Oil, and Aid”.Abstract

Seminal arguments in political economy hold that citizens will more readily demand accountability from governments for taxes than for non-tax revenue from oil or aid. Two identical experiments on large, representative subject pools in Ghana and Uganda probe the effects of different revenue types on citizens' actions to monitor government spending. Roughly half of all subjects willingly sign petitions and donate money in order to scrutinize all three sources. However, neither Ghanaians nor Ugandans are more likely to take action for tax revenues than for oil or aid. Results also suggest no differences among taxes, oil and aid in citizens' perceptions of transparency, misappropriation risk, or public goods provision. Results are robust to numerous alternative speciffications and subgroup partitions, including the better educated, wealthier, and taxpaying population, suggesting a need for rethinking the axiom that taxation strengthens citizens' demands for accountability in developing countries.

Mansfield, Edward D., and Helen V. Milner. Working Paper. “The Domestic Politics of Preferential Trade Agreements in Hard Times: Resisting Protectionism”.Abstract

There is evidence that some countries negotiate trade agreements during economic downturns. Why would a leader do this? We argue that political leaders can gain from such agreements because of the signals they send to their publics. Publics are less likely to blame leaders for adverse economic conditions when they have implemented sound economic policies, such as signing agreements designed to liberalize trade and prevent a slide into protectionism. In hard economic times, leaders—especially those in democratic environments—may find that trade agreements are a useful way to reassure the public. Since majorities in many countries around the world view trade favorably, leaders may see agreements that prevent them from adopting protectionism as a way to maintain support. We evaluate this argument by analyzing preferential trade agreements (PTAs) formed since 1951. We find that, on average, democratic countries are more likely to ratify PTAs during hard economic times. We also find that democratic leaders who sign PTAs during downturns enjoy a longer tenure than their counterparts who do not sign such agreements.

Findley, Michael G., Helen V. Milner, and Daniel L. Nielson. Working Paper. “The Choice among Aid Donors: The Effects of Multilateral vs. Bilateral Aid on Recipient Behavioral Support”.Abstract

Scholars studying foreign assistance differ over whether multilateral aid is preferable to bilateral aid for promoting development, but nearly all build their cases primarily on highly aggregated cross-national time-series data. We investigate this topic experimentally from the perspective of those whom the foreign aid directly affects: recipient citizens and elites. We thus report results of a survey experiment with behavioral outcomes on more than 3,000 Ugandan citizens and over 300 members of Uganda’s Parliament. In spite of a large literature suggesting differences, the findings generally reveal few substantive differences in citizens’ and elites’ preferences and behavior toward the two types of aid. While no strong pattern of differences emerges, limited evidence suggests that the public evinces greater trust in multilateral institutions, and both masses and elites feel that multilateral aid is more transparent. Overall, these null results inform an ever-expanding literature, which is increasingly articulating distinctions between multilateral and bilateral aid. At least in the minds of the recipients, however, multilateral and bilateral aid may not in fact be all that different. This accords with the literature noting the strong overlap in aid organizations and bemoaning the fact that they do not specialize more. Our results raise the question about why have both multilateral and bilateral aid donors if they in effect do the same thing.

Jamal, Amaney, and Helen V. Milner. Working Paper. “Economic and Cultural Sources of Preferences for Globalization in Egypt ”. SSRN VersionAbstract

What factors shape attitudes toward economic globalization? Theories in international and comparative political economy emphasize the importance of economic variables, like factor endowments, as determining preferences toward international trade. Other literature emphasizes the importance of non‐economic factors, including nationalism and cultural values, like tolerance, that might explain citizens’ predispositions toward globalization. This paper attempts to adjudicate between these two competing arguments by focusing on the factors correlated with public support for increasing trade in Egypt. On the one hand, Egypt might benefit from economic globalization. On the other, it has a rich and deep socio‐political history of Western colonialism, political Islam, and radicalism. This history might serve as the lens through which the potential benefits of globalization are assessed. In this paper, we investigate these questions, using data from the Pew Global Attitudes 2010 survey of Egyptians. We find that both economic and cultural factors matter, but that cultural ones may be even more influential in this particular developing country setting.

Milner, Helen V., and Bumba Mukherjee. Working Paper. “Democracy, Globalization and the Skill-Bias in Trade Policy in Developing Countries”.Abstract

Existing research suggests that democracy fosters economic globalization by promoting trade liberalization in the developing world. We argue that democracy in developing countries generates a “skill bias” in trade protection where democratic incumbents have incentives to increase tariffs on high skilled goods but reduce trade barriers on low skilled goods. Our model analyzes how electoral competition and interest group politics in the Heckscher-Ohlin economy of a democratic developing country affects trade protection on low and high skilled goods. It predicts that electoral competition induces the government to reduce trade barriers for low skilled goods to appeal to the abundant factor, namely the low skilled median voter, who optimally prefers a reduction in tariffs for low skilled goods. Yet electoral politics also engenders lobbying pressure and campaign contributions from the scarce factor in the polity – the owners of skill-intensive industries (the interest group) – who prefers more trade protection for high skilled goods. The government rationally responds to these contributions by protecting skill-intensive industries from import competition. Empirical tests conducted on a disaggregated industry-level dataset of trade protection supports our theoretical predictions.

Büthe, Tim, and Helen V. Milner. Working Paper. “The Interaction of International and Domestic Institutions: Preferential Trade Agreements, Democracy, and Foreign Direct Investment”. Stable URLAbstract

Foreign direct investment (FDI) has come to be seen as a promising avenue for boosting economic development. As a consequence, most developing countries now seek to attract FDI, often by making ex ante promises to foreign investors not to pass laws or regulations — or refrain from other actions — that would diminish the value of the investment ex post. But how credible are such promises? A number of recent studies have examined the effect of domestic institutions (veto players, democracy, etc.) on the credibility of commitments by developing country governments toward foreign private economic actors, such as foreign investors. In addition, a few studies have examined the effect of international institutions on the credibility of such commitments. We examine the interaction of domestic and international institutions in promoting FDI. We show theoretically and empirically that democratic domestic institutions help attract more FDI into developing countries only in the context of economically liberal international institutions.

Milner, Helen V., and Bumba Mukherjee. Working Paper. “Democracy and Trade Policy in Developing Countries: Particularism and Domestic Politics with a Case Study of India”.Abstract

What explains the variation in trade policy among democracies in developing countries? Why have some liberalized trade more than others? We analyze the impact of political particularism – defined as the degree of party discipline and the incentives for politicians to cultivate a personal vote – on trade protection. We present theoretical results from a model of particularism and its effects on tariffs; we present quantitative evidence to test the model; and then we develop a case study of India to illuminate it. Our model analyzes how an increase in particularism (that is, a shift from a party-centered to a more candidate-centered system) interacts with the degree of inter-industry occupational mobility of labor and the asset-specificity of industries to influence trade policies in developing democracies. Our model suggests that an increase in particularism induces leaders from the ruling and opposition parties to shift trade policy in equilibrium to the median voter's optimal preference, who in a developing society is a worker; and this means a reduction in trade barriers when labor mobility is high. Our data strongly support this conclusion. Our case study of India shows how the dynamics of a party-centered system operate to maintain higher trade barriers.

Milner, Helen V. Working Paper. “The Global Spread of the Internet: The Role of International Diffusion Pressures in Technology Adoption”.Abstract

What factors have promoted and retarded the spread of the internet globally? Much as other technologies, the internet has diffused unevenly across countries. The main proposition is that its spread is neither purely economic nor entirely domestic. International diffusion pressures exert a powerful influence. The adoption of new technology depends on domestic policy, and this in turn depends on the choices that political leaders make about rules governing new technologies. I examine the impact of international diffusion pressures on political leaders, testing the role of five types of such pressures. The distribution of capabilities globally may shape the spread of the internet, as dominant power(s) may directly or indirectly coerce others into adopting. Patterns of adoption may also be shaped by competitive pressures from the world market. Technological change especially may depend on network externalities, involving the number of adopters already in existence. Learning from other countries or from participating in international organizations may stimulate adoption. Finally, countries may simply copy the policies and hence the adoption patterns of other countries with whom they share sociological similarities. Data from about 190 countries since 1990 shows that diffusion pressures matter, even when controlling for domestic factors. Economic competition and sociological emulation play consistently important roles in affecting the spread of the internet.

Milner, Helen V., and Dustin Tingley. Working Paper. “The Economic and Political Influences of Different Dimensions of United States Immigration Policy”.Abstract

Recent research on political attitudes towards immigration often pits arguments emphasizing economic self-interest against ideological or cultural explanations. Many of these studies conceptualize immigration policy along a single dimension instead of disaggregating it into its distinct policy dimensions. Conditional on the type of immigration policy, different explanations should have more or less explanatory power. We disaggregate immigration policy into six different dimensions and provide theoretical scope conditions for when ideological and economic factors should matter. We test these predictions on votes on immigration policy in the US House of Representatives from 1979-2006. We advance the debate on the determinants of immigration policy by showing that both economic self-interest and ideological explanations can be powerful, depending upon the type of immigration policy under consideration.