Crony Globalization

Publication Year
2022

Type

Article
Abstract

Can a partial approach to economic globalization comprise a strategy to maintain elite cohesion in nondemocracies? We investigate this question for a group of predominantly nondemocratic Muslim-majority countries across Africa, the Middle East, and Asia. To draw causal inferences, we leverage the timing of the World Trade’s Organization es- tablishment in 1995 as a plausibly exogenous (global) shock to trade liberalization to show that many Muslim-majority societies have systematically lagged behind in rela- tive terms (to non-Muslim countries) on measures of de jure globalization capturing policies associated with tariffs, hidden import barriers, investment and capital account restrictions. We attribute this “globalization deficit” to policy choices that protect politically connected commercial interests (political cronies). We corroborate the rel- evance of political connections at the micro-level by compiling new sector-level data from Egypt and Tunisia which ties slower tariff liberalization in sectors penetrated by political cronies.

Publication Status
Working Papers