Matthew DiGiuseppe

Good for the money

Previous research indicates that a lack of state capacity is a key determinant of internal armed conflict. Scholars identify several internal dimensions of state capacity, but have yet to explore how international finance influences state resources. This is surprising because sovereign lending has increased dramatically in recent decades and plays an increasing role in the functioning of developed and developing governments. In this article, we explore this relationship between a state’s integration into global credit markets and its subsequent capacity to promote domestic stability. We argue that international capital increases a state’s ability to respond to internal opposition because states with favorable credit terms can expand their resource base beyond domestic constraints to deter, accommodate, or repress opposition while maintaining a level provision of resources to their political base. We examine the influence that both capital access and credit terms have on the risk of civil conflict in 141 countries from 1981 to 2007. Our empirical results indicate that states with affordable credit access are indeed less likely to experience civil conflict.

Guns, butter, and debt

I argue that favorable access to sovereign credit provides governments with greater autonomy to invest in security by allowing political incumbents to relax fixed-budget constraints. Borrowing permits leaders to delay and minimize the macroeconomic and redistributive costs associated with domestic sources of finance. Consequently, leaders of creditworthy states face fewer political costs when increasing military expenditure in response to growing demand or maintaining military expenditure when government revenues fall. A cross-sectional time-series analysis supports two observable implications of the argument. First, creditworthiness is positively associated with military spending with an effect on par with regime type. Second, creditworthiness conditions the effect of external threats on military expenditure, suggesting that poor credit terms constrain the provision of security.

Borrowed Time: Sovereign Finance, Regime Type, and Leader Survival

This study explores the conditional influence of sovereign credit on leader survival. We specifically focus on credits heterogeneous effect on leadership survival across regimes. We argue that non‐democratic leaders are more sensitive to credit access and cost than democratic leadership. We use event history analysis to test the conditional relationship between sovereign credit and leader tenure from 1981 to 2004. Examining both domestic and global determinants of credit access and costs, our findings are consistent with the assertion that non‐democratic leadership survival is linked to credit even when addressing issues of endogeneity.

The Physical Consequences of Fiscal Flexibility: Sovereign Credit and Physical Integrity Rights

Leaders are assumed to face fiscal constraints on their ability to remain in office by competitively distributing public and/or private goods. However, many leaders can relax this constraint by borrowing on sovereign credit markets. This article argues that states with the fiscal flexibility offered by favorable credit terms have the resources necessary to (1) respond to citizen demands with policies other than widespread repression and (2) avoid agency loss that may result in unauthorized repression by state agents. Empirical analyses indicate that creditworthy states have greater respect for physical integrity rights and are less likely to suffer diminished respect for those rights when facing violent dissent or negative shocks to government revenues.

International Development NGOs and Bureaucratic Capacity: Facilitator or Destroyer?:

Do development international nongovernmental organizations (INGOs) facilitate or destroy the bureaucratic capacity of the states in which they operate? The literature is split on this question. Some scholars argue that development INGOs weaken state capacity by delivering social services that the government is supposed to provide. Others argue that by increasing a country’s domestic demand for improved human rights, development INGOs improve a government’s capacity to fulfill them. In this paper, we show that the effect of development INGOs on state capacity depends on whether a state is democratic or nondemocratic. In our cross-sectional time-series analysis, we find that development INGO presence has a significant positive relationship with state capacity in democracies but no relationship with state capacity in nondemocratic states. These findings help explain the inconsistent claims in the existing INGO literature and are also relevant for development INGOs and the policymakers that support them.

Transparency, Risk, and FDI

A central theme in the foreign direct investment (FDI) literature is that political risk deters investment. The empirical record, however, is mixed. multinational corporations (MNCs) continue to invest in high-risk countries. We argue it is not merely about the level of risk, but rather firms’ ability to quantify risk. When MNCs can confidently assess both the nature and the degree of the threats present, they can take appropriate measures to hedge against them. This should increase their willingness to invest, even in higher risk environments. We contend that the ability to accurately quantify risk is a function of political transparency. Among opaque countries, we expect risk to exert a deterring effect on FDI, as commonly theorized. Among more transparent countries, however, we expect that risk is a less salient concern for MNCs. We test this argument using firm-level data on the foreign operations of some of the world’s largest multinationals between 1995 and 2008. The evidence supports the argument. Risk has a strong negative effect on the likelihood of investment at lower levels of transparency, but the magnitude of this effect weakens at higher levels of transparency. This pattern is consistent across multiple types of political risk, and is most pronounced in nonextractive (relative to extractive) industries.