Publications

Working Papers
Ahmed, Faisal Z., and Adeel Malik. Working Papers. “Crony Globalization:The Politics of Partial Liberalization in Muslim Societies”. Abstract

We show that the more hesitant and partial approach in many Muslim societies towards economic globalization may comprise a strategy of regime stability. To draw causal inferences, we exploit a difference-in-differences research design that leverages the timing of the World Trade Organization’s (WTO) establishment in 1995. Using this plausibly exogenous (global) shock to trade liberalization, we show that Muslim societies have systematically lagged behind in relative terms (to non-Muslim countries) on measures of de jure globalization capturing various economic restrictions expressed through tariffs, hidden import barriers, taxes on international trade, and investment and capital account restrictions. We then compile novel and detailed sector-level data from several North African countries to study potential channels, finding slower tariff liberalization in sectors penetrated by political cronies. Our findings suggest that partial liberalization can be a strategy for regime stability in many Muslim societies.

Ahmed, Faisal Z., and Alexander Slaski. Working Papers. “Does diplomacy facilitate trade?: Evidence from US ambassadors”. Abstract

We trace the impact of diplomacy on bilateral international trade. Leveraging high-frequency data and using the timing of US Presidential inaugurations as an instrumental variable, we show that periods of ambassadorial vacancies reduce US monthly exports, but do not affect US imports. These findings are driven by the vacancies of career diplomats and are magnified in poorer countries, where the lower quality of institutions make the commitment mechanisms that diplomats provide particularly effective. Our findings suggest that diplomacy may affect export performance, particularly for ambassadors that are more experienced and those that are assigned to weak institutional environments.

Submitted

Tragically, dictatorship and civil strife are prevalent in many contemporary Muslim-majority (hereon, Muslim) societies; characteristics that are detrimental to socio-economic development. In Conquest and Rents: A Political Economy of Dictatorship and Violence in Muslim Societies, I offer an original explanation for why. The book is grounded in a positive political economy approach that advances a formal theory that is “tested” in a historical and contemporary setting..

Conquest and Rents argues that contemporary Muslim societies tend to be less developed, less democratic, and more conflict prone on average. However, there is considerable variation within the Muslim world depending on how Islam was spread. Territories where Islam spread via military conquest  developed institutions and practices that led to political regimes that made them more impervious to democracy and, in response to declines in rents, more prone to civil war. In contrast, societies in non-conquered territories – including some Muslim societies, such as Indonesia and Malaysia – developed governance structures that made them more susceptible to economic and political (democratic) development; and where declines in rents provided opportunities for transitions to democracy.

A central takeaway from Conquest and Rents is that neither Islam nor aspects of Muslim culture are the root causes of dictatorship and civil strife in many contemporary Muslim societies. Rather, it is due to the interplay of two factors: (1) the path dependent political effects (e.g., institutions, governing coalitions) attributable to societies that experienced Muslim conquest and (2) increases and decreases in various types of rents (e.g., oil revenues, foreign aid) in those societies. By linking these two factors – conquest and rents – to patterns of civil war, dictatorship (and democracy), the book’s theory and empirics contributes to rich literatures in institutional economics, historical legacies, international political economy, and the resource curse. The book’s topic and approach should appeal to scholars in political economy, comparative and international politics, as well as policymakers interested in understanding why many Muslim societies are economically and politically underdeveloped and its implications abroad (e.g., transnational terrorism, refugee flows).

ahmed_cr2021_contents.pdf
Forthcoming
Ahmed, Faisal Z. Forthcoming. “From grievances to civil war: The impact of geopolitics.” Review of International Organizations. Abstract

I revisit claims that the Cold War had no meaningful effect on civil war after 1990 by probing its empirical veracity. I argue and employ a Bartik-style difference-in-differences identification strategy to show that countries with greater political grievances during the Cold War were more likely to experience civil war after the Cold War. I provide evidence suggesting that changes in the credibility of external support to both governments and rebels affected this uptick in conflict onset in aggrieved countries. These findings suggest the confluence of geopolitics and preexisting grievances played a causal role in civil war after the Cold War.

ahmed_rio2021_proofs.pdf
2021
Ahmed, Faisal Z., Daniel Schwab, and Eric Werker. 2021. “The Political Transfer Problem: How Cross-Border Financial Windfalls Affect Democracy and Civil War.” Journal of Comparative Economics 49 (2): 313-339. Abstract

Following a rise in the price of oil in the 1970s, a number of developing countries received a significant boost in foreign transfers as oil producers could not absorb all of their new rents domestically. When those transfers ended, some recipients of these transfers eventually democratized as part of the “Third Wave” while others languished as violent autocracies. This raises a puzzle: how can declines in external transfers foster democratization in some cases, but heighten political violence in others? We develop a formal model to reconcile this tension and demonstrate that autocratic incumbents can become more repressive with higher levels of transfers and either experience civil conflict or democratize at lower levels of transfers. We characterize these dynamics as a “political transfer problem” and then use case studies and econometric evidence to argue that the largest windfall of the 20th century, the period from 1973-85 during which oil prices were at all-time highs, and its aftermath, produced political dynamics consistent with our model.

asw_jce2021_proofs.pdf
Ahmed, Faisal Z. 2021. “Muslim conquest and institutional formation.” Explorations in Economic History 81. Publisher's Version Abstract

Recent studies suggest that Muslim military conquest (632–1100 CE) generated an institutional equilibrium with deleterious long-run political economy effects. This equilibrium was predicated on mamluk institutions: the use of elite slave soldiers (mamluks) and nonhereditary property rights over agricultural lands to compensate them (iqta). This paper evaluates this historical narrative by exploring the accuracy of its initial step. Using a difference-in-differences strategy, I show that conquest changed institutions in conquered territories. I then provide suggestive evidence that the presence and efficacy of mamluk institutions affected this institutional configuration and that leaders survived longer in power during the conquest period.

ahmed_eeh2021_proofs.pdf
2020
The Perils of International Capital
Ahmed, Faisal Z. 2020. The Perils of International Capital. Cambridge University Press. Abstract

Can foreign capital empower dictatorships? In this book, I offer a unified theory of the impact of three prominent types of international capital – foreign aid to governments, migrant remittances to households, and foreign direct investment to firms – on the survival of dictatorships. Existing scholarship that examines different types of international capital in isolation misestimates their effects. The book’s unified theoretical approach clarifies the channels through which a strategically oriented government can leverage each type of capital flow to finance two important instruments of nondemocratic politics: repression and patronage. The book’s methodological approach takes seriously questions of causal identification, exploiting plausibly exogenous variation in capital flows to more precisely estimate their effects. In doing so, I introduce creative ways to turn the observable world into a quasi-experimental laboratory. The book’s theory, case studies, and cross-national statistical evidence demonstrate how international capital can foster authoritarian politics. These findings challenge many existing studies and contribute to several important literatures in economics and political science.

ahmed_pic2020_contents.pdf
2019
Ahmed, Faisal Z. 2019. “Foreign aid and repression.” Lessons in Foreign Aid and Economic Development: Micro and Macro Perspectives. Palgrave MacMillan. Abstract

Despite the democracy-enhancing intentions of most donors, foreign aid can often offer opportunities for governments to politically repress their populations. This chapter argues and presents evidence that aid from the world’s largest bilateral donor – the United States – harms political rights in recipient countries. U.S. aid does so by weakening government accountability via the taxation channel. These findings run counter to the stated intentions of the U.S. government– and other bilateral donors – to foster political liberalization abroad via bilateral economic assistance.

ahmed_palgrave2019_final.pdf
2017
Ahmed, Faisal Z. 2017. “The Political Economy of Unearned Foreign Income: An Application for Non-oil Producing Muslim States.” Palgrave Dictionary on Middle East Economics. Palgrave MacMillan. Abstract

This entry argues that foreign aid and remittances constitute a form of “unearned foreign income” that has affected the public finances and shaped political outcomes in the non-oil producing Muslim countries in North Africa, the Middle East, and South Asia. Aid and remittance flows have stabilized authoritarian rule in this “broader” Middle East and North Africa (MENA) region by reducing the likelihood of conflict, fostering corruption, and extending the duration of non-democratic governments.

ahmed_palgravedictionary2018_preprint.pdf
Ahmed, Faisal Z. 2017. “Remittances and Incumbency: Theory and Evidence.” Economics and Politics 29 (1): 22-47. Abstract

By raising household income, remittances lower the marginal utility of targeted electoral transfers, thus weakening the efficacy of vote buying. Yet, remittances make individuals wealthier and believe the national economy is performing well, which is positively attributed to the incumbent. Building on these insights, I show that the confluence of these divergent channels generate a surprising result that at increasingly higher levels of dissatisfaction with the incumbent, a remittance recipient is more likely to vote for the incumbent than a non-remittance recipient. These predictions and their underlying mechanisms are substantiated across 18 Latin American countries.

ahmed_ep2017_proofs.pdf
Ahmed, Faisal Z., and Laura Alfaro. 2017. “Market Reactions to Sovereign Litigation.” Capital Markets Law Journal 12 (2): 141-163. Abstract

Recent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy. Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. This paper critically examines this claim by evaluating market reactions to litigation using an event study methodology. We analyze the effect on sovereign bonds from litigation events, with particular emphasis on Argentina for the period, 1993-2014. We find evidence that the market reacts differently to Argentina than in other countries.

ahmedalfaro_sovlitigation.pdf
2016
Ahmed, Faisal Z. 2016. “Does foreign aid harm political rights?: Evidence from U.S. aid.” Quarterly Journal of Political Science 11 (2): 118-217. Abstract

The United States is the world's largest bilateral foreign aid donor. For many developing countries, this aid constitutes a nontrivial share of state revenue with the capacity to shape a recipient's governance. Whether such assistance has a causal effect on political liberalization, however, is plagued by concerns with endogeneity bias. To mitigate this concern, I exploit plausibly exogenous variation in the legislative fragmentation of the U.S. House of Representatives to construct a powerful instrumental variable for U.S. bilateral aid disbursements. For a sample of 150 countries from 1972 to 2008, U.S. aid harms political rights, fosters other forms of state repression (measured along multiple dimensions), and strengthens authoritarian governance. U.S. aid does so by weakening government accountability via the taxation channel. These findings counter the publicly stated objectives of the U.S. government to foster political liberalization abroad via bilateral economic assistance.

ahmed_qjps2016.pdf
2015
Ahmed, Faisal Z., and Eric Werker. 2015. “Aid and the Rise and Fall of Conflict in the Muslim World.” Quarterly Journal of Political Science 10 (2): 155-186. Abstract

The conflict following the Arab Spring is not the first wave of civil war in the Muslim world in recent time. From the mid-1980s to the end of the century, an average of one in 10 predominantly-Muslim countries experienced violent civil war in any given year. We provide a partial explanation for this statistic: a foreign aid windfall to poor, non-oil producing Muslim countries during the twin oil crises of the 1970s allowed the recipient states to become more repressive and stave off rebellion. When oil prices fell in the mid-1980s, the windfall ended, and the recipient countries experienced a significant uptick in civil war. To provide a causal interpretation we leverage a quasi-natural experiment of oil price induced aid disbursements which favored Muslim countries over non-Muslim countries. Our empirical findings are consistent with existing theories that foreign aid can "buy" stability.

ahmedwerker_qjps2015.pdf
2014
Howell, William, and Faisal Z. Ahmed. 2014. “Voting for the President: The Supreme Court during war.” Journal of Law, Economics, and Organization 30 (1): 39-71. Abstract

An extraordinary body of scholarship suggests that wars, especially major wars, stimulate presidential power. And central to this argument is a conviction that judges predictably uphold elements of presidents’ policy agendas in war that would not withstand judicial scrutiny in peace. Few scholars, however, have actually subjected this claim to quantitative investigation. This article does so. Examining the universe of Supreme Court cases to which the US Government, a cabinet member, or a president was a named party over a 75-year period, and estimating a series of fixed effects and matching models, we find that during war Justices were 15 percentage points more likely to side with the government on the statutory cases that most directly implicated the president. We also document sizable effects associated with both the transitions from peace to war and from war to peace. On constitutional cases, however, null effects are consistently observed. These various estimates are robust to a wide variety of model specifications and do not appear to derive from the deep selection biases that pervade empirical studies of the courts.

howellahmed_jleo2014_.pdf
Ahmed, Faisal Z., Anne Greenleaf, and Audrey Sacks. 2014. “The Paradox of Export Growth in Areas of Weak Governance: The Case of the Ready Made Garment Sector in Bangladesh.” World Development 56: 258-271. Abstract

Can export growth occur in states with weak governance and competitive clientelism? Conventional wisdom is that effective industrial policy requires a politically stable country with a centralized government. Absent these conditions, countries can pursue alternative types of industrial policies. Contexts with stable, or predictable, mis-governance and a government committed to nonintervention can yield strong export performance. We test this hypothesis in Bangladesh by examining the creation of industrial policy in the Ready Made Garment (RMG) sector. This paper highlights how the particular “political settlement” in Bangladesh has created a viable environment in which the RMG sector continues to grow.

ahmedgreenleafsacks_worlddevelopment2014.pdf
2013
Ahmed, Faisal Z. 2013. “Remittances deteriorate governance.” Review of Economics and Statistics 95 (4): 1166-1182. Abstract

 

I use a natural experiment of oil-price-driven remittance flows to poor, non-oil-producing Muslim countries to demonstrate that remittances deteriorate the quality of governance, especially in countries with weak democratic institutions. The results indicate that a 1 standard deviation increase in remittances raises corruption by 1.5 index points (on a 6-point scale), which is equivalent to a $600 decrease in per capita GDP. Concomitantly, remittances may enable governments to reduce their delivery of public services (for example, health care, school enrollment). The results suggest that political institutions may mediate the potentially beneficial socioeconomic effects of remittance inflows.

 

ahmed_restat2013.pdf
2012
Ahmed, Faisal Z. 2012. “The Perils of Unearned Foreign Income: Aid, remittances, and government survival.” American Political Science Review 106: 146-165. Abstract

Given their political incentives, governments in more autocratic polities can strategically channel unearned government and household income in the form of foreign aid and remittances to finance patronage, which extends their tenure in political office. I substantiate this claim with duration models of government turnover for a sample of 97 countries between 1975 and 2004. Unearned foreign income received in more autocratic countries reduces the likelihood of government turnover, regime collapse, and outbreaks of major political discontent. To allay potential concerns with endogeneity, I harness a natural experiment of oil price–driven aid and remittance flows to poor, non–oil producing Muslim autocracies. The instrumental variables results confirm the baseline finding that authoritarian governments can harness unearned foreign income to prolong their rule. Finally, I provide evidence of the underlying causal mechanisms that governments in autocracies use aid and remittances inflows to reduce their expenditures on welfare goods to fund patronage.

ahmed_apsr2012.pdf
2010
Ahmed, Faisal Z., Laura Alfaro, and Noel Maurer. 2010. “Empires and Lawsuits: On the enforcement of sovereign debt in Latin America.” Law and Contemporary Problems 73 (4): 39-46.
ahmedalfaromaurer_lcp2010.pdf
2009
Werker, Eric, Faisal Z. Ahmed, and Charles Cohen. 2009. “How is Aid Spent?: Evidence from a Natural Experiment.” American Economic Journal - Macroeconomics 1 (2): 225-244. Abstract

We use oil price fluctuations to test the impact of transfers from wealthy OPEC nations to their poorer Muslim allies. The instrument identifies plausibly exogenous variation in foreign aid. We investigate how aid is spent by tracking its short-run effect on aggregate demand, national accounts, and balance of payments. Aid affects most components of GDP though it has no statistically identifiable impact on prices or economic growth. Much aid is consumed, primarily in the form of imported noncapital goods. Aid substitutes for domestic savings, has no effect on the financial account, and leads to unaccounted capital flight.

werkerahmedcohen_aej_macro_2009.pdf
2008
Werker, Eric, and Faisal Z. Ahmed. 2008. “What do non-governmental organizations do?” Journal of Economic Perspectives 22 (2): 73-92.
werkerahmed_jep2008.pdf