Threshold effect of globalization on democracy: The role of demography

Tunisia - 15 May 2018

Trade topics: International Trading System

The literature presents conflicting expectations about the effect of globalization on democracy. One view expects globalization to enhance democracy, a second argues that globalization obstructs democracy; a third argues that it does not necessarily affect democracy. In this paper, we consider the threshold effect approach (Hansen, 1999) to reconcile these different results. We study the role of demography in the determination of the relationship between globalization and democracy. Based on a panel of 97 countries for the period 1993-2013, we use a threshold fixed effect panel model to estimate the effect of globalization on democracy, taking into account the demographic structure of the country. We find evidence of threshold effect of demographic characteristics on globalization and democracy relationship and prove that the impact of globalization on democracy is regime specific. Our results show a positive impact of globalization associated with ‘late demographic transition regime’ and a negative impact for countries with ‘early demographic transition regime’.