Trade Liberalization and Political Instability in Developing Countries

One of the disputed consequences of global economic integration is the possible effect that foreign economic liberalization exerts on social cohesion. Proponents of commercial liberalism expect a stabilization, while globalization critics are much more sceptical. They assume at least for the short run destabilizing effects. We examine in this paper the contradictory claims for the developing world. The rush to free trade , to use Rodrik´s famous metaphor, has been particularly pronounced in this group of countries. Our results refute based on different indicators the fear that growing economic interdependence undermines the all to often fragile developing countries. The positive effect of economic openness is, however, only limited