To Globalize or Not to Globalize? The Effects of Economic Integration on the Domestic Political Stability of Developing Countries, 1985-1992

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Are countries risking dire political consequences by succumbing to the pressures of the globalization phenomenon? This study attempts to explain the effects of trade and financial liberalization in developing countries on the level of domestic political stability. Using a sample of 65 countries from the developing world from the time period of 1985-1992, this paper uses a pooled-cross-sectional time series design to explain variations in the instability across space and time. The analysis finds that trade and financial openness exhibit downward pressure on the level of political instability. The model also finds evidence that higher levels of economic development are linked to higher levels of stability. The link between economic openness and domestic stability may show the path by which developing countries may achieve the stability of their developed counterparts.