Preferential trading agreements and economic reforms in developing countries

In this policy paper the authors Leonardo Baccini from Princeton University and Johannes Urpelainen from Columbia University, USA examine how leaders use preferential trading agreements (PTAa) with European Union and the United States to promote liberal economic policies. They argue that under democratization, new leaders would benefit the most from credible commitment and side payments to compensate vulnerable domestic constituencies for their losses. Their empirical analysis, which includes also Croatia, shows that under democratization, leader change greatly increases the probability that the government of a country begins treaty negotiations. The analysis also demonstrates that PTAs induce liberalization in different sectors of the economy.