Threshold Effect of Globalization on Democracy: the Role of Demography, Journal of the Knowledge Economy
Tunisia - 20 January 2020
Trade topics: Trade and Development
This article is published in the Journal of the Knowledge Economy. 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 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 panel model (Hansen 1999) as well as a dynamic threshold panel model (Kremer et al. 2013) to estimate the effect of globalization on democracy, taking into account the demographic structure of the country. We find evidence of a threshold effect of demographic characteristics on the relationship between globalization and democracy and prove that the impact of globalization on democracy is regime specific. Our results show a positive impact of globalization associated with “early demographic transition regime” and a negative impact for countries with “late demographic transition regime.” Our results remain robust to alternative measure of democracy.