Fiona McGillivray

Party Discipline as a Determinant of the Endogenous Formation of Tariffs

Theory: This paper introduces the institutional elements of party behavior as a determinant of the endogenous formation of tariffs. It considers how party discipline affects which industries receive tariff protection from foreign imports. I develop a theoretical framework and generate a set of testable predictions. Hypotheses: Highly disciplined parties in majoritarian systems offer trade policies favorable to voters in marginal districts. At the margin, electorally consolidated industries located in marginal districts will be highly protected. However, in majoritarian systems with low party discipline, the model predicts tariff protection will favor large, electorally dispersed industries. Industries concentrated in marginal districts are expected to be the least favorably protected. Methods: Regression analysis is used on data from the 1970s on industry tariffs levels and industry employment levels across electoral districts in the United States and Canada. Results: The findings generally support the theoretical model. In Canada, industries highly concentrated in marginal districts receive the most favorable levels of protection. In the United States, industries located in safe districts receive more favorable levels of protection than industries located in marginal districts. Although electorally concentrated industries receive higher levels of protection, on average, than electorally decentralized industries; in the United States large, electorally dispersed industries are able to secure favorable levels of protection.

Political Institutions, Coercive Diplomacy, and the Duration of Economic Sanctions

A theory of sanction duration that focuses on differences between democratic and nondemocratic states in the structure of leaders’ support coalitions is tested, using a hazard model to analyze a data set of 47 sanction events with 272 observations. Results show that leadership change strongly affects the duration of sanctions only in the case of nondemocratic states. Leadership change in democratic states is unrelated to the duration of sanctions; however, leadership change in nondemocratic sender and nondemocratic target states is strongly related to the ending of economic sanctions.

The impact of leadership turnover on trading relations between states

We test how domestic political institutions moderate the effect of leadership turnover on relations between states. Deriving hypotheses from recent theoretical work, Bueno de Mesquita et al. and McGillivray and Smith, we examine how leader change affects trading relations between states using dyadic trade data. Consistent with hypotheses, we find that large winning coalition systems, such as democracies, are relatively immune from the vagaries of leadership change. In such systems, trade remains relatively constant whether leader change occurs or not. In contrast, when winning coalition size is small, as in autocratic states, leadership change profoundly alters relations, causing a decline in trade. Finally, we examine instances of poor relations, measured by a significant decline in trade compared to historical levels. As predicted, instances of poor relations are less common between pairs of democracies than other dyadic pairings. Further, leadership turnover in autocratic systems restores trading relations between states. The effect of leadership change in democracies is much less pronounced.An earlier version of this article was prepared for the 2002 Peace Science Society meeting in Tucson, Arizona. We gratefully acknowledge the financial support of the National Science Foundation, SES-0226926. We thank John Oneal and Bruce Russett for generously making their data available to us. We thank audiences at New York University, the University of Rochester, Yale University, and several anonymous reviewers for their helpful comments.

Credibility in Compliance and Punishment: Leader Specific Punishments and Credibility

The ability of nation A to compel nation B to grant it concessions depends upon the credibility with which A can commit to punish B for noncompliance. Discarding traditional unitary actor approaches, we assume policy in each nation is set by mortal political leaders and model the compliance/punishment relation between A and B in a noisy infinitely repeated setting. If nations utilize leader specific punishment, that is target policies against leaders rather than the nations they represent, then leaders improve the credibly of their threats to punish noncompliance since citizens have incentives to depose leaders to restore national integrity.

Federal Institutions and Multinational Investors: Federalism, Government Credibility, and Foreign Direct Investment

Political risk is an important factor in the decision to invest abroad. While the investment potential might be lucrative, there is always the risk that the host government will expropriate the profits and assets of the foreign investor. Political institutions, however, can serve as constraints on the actions of political actors in the host country. We argue that federal structures lower political risk. Joint-reputational accountability in overlapping political jurisdictions increases the likelihood that investment contracts will be honored. Empirical analyses of cross-sectional time-series data for 115 countries, from 1975–1995, are used to study how political institutions affect foreign direct investment (FDI) flows. After controlling for the effect of relevant economic and political variables, we find that both democratic and federal institutions help attract FDI, although the additive effect of democracy and federalism is small. This is not surprising; democratic systems already have low political risk; they do not need the additional credibility that the federal system provides to attract FDI. In contrast, we expect that federal structures significantly improve the trustworthiness of less democratic states. Empirically, we find that less democratic countries with federal political systems attract some of the highest levels of FDI.

The Impact of Leadership Turnover and Domestic Institutions on International Cooperation

In the context of a noisy, continuous-choice prisoners dilemma, the authors examine how leadership turnover and domestic institutions affect the depth and reliability of cooperative agreement that can be enforced between states through the use of leader-specific punishment strategies. If foreign nations target punishments against leaders observed to cheat on cooperative arrangements (i.e., they refuse any future cooperation as long as the responsible incumbent remains in office), then citizens remove leaders caught cheating, providing the cost of doing so is less than the value of the cooperation foregone. For leaders whoare easily replaced, being caught cheating cost them their job. Since cheating jeopardizes their tenure, such leaders can credibly commit to deeper and more reliable cooperation. The authors derive hypotheses about the patterns of cooperation and leadership turnover predicted under different institutional arrangements.

Institutional determinants of trade policy

A series of formal models compares how institutions affect the distribution of trade protection. Specifically, we consider how the level of party discipline within majoritarian political systems affects the political incentives for leaders to supply protection to geographically distributed industries. In plurality systems with high party discipline, such as Canada, Australia and the United Kingdom, industries concentrated in marginal electoral districts receive the most protection. In the United States, a plurality system with low party discipline, large industries geographically dispersed over many electoral districts receive the most favorable protection.