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Democratization in the Shadow of Globalization
Published online by Cambridge University Press: 26 February 2021
Abstract
In this article I develop a new theory of how globalization in the form of increasing potential foreign direct investment (FDI) inflows affects democratization. As the level of potential FDI inflows increases, workers become more willing to support democratization because of the large wage benefits from liberalizing FDI under democracy, while capitalists become less willing to support democratization because of their increasing need for protection from the dictator in the form of FDI restrictions. Increased demand for protection allows dictators to extract larger share of rents from capitalists. The effect of increasing potential FDI on democratization is ambiguous because it increases both workers’ incentive to revolt and dictators’ resistance to democratization.
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