Do international non-governmental organizations inhibit globalization? the case of capital account liberalization in developing countries

Why do countries liberalize capital controls? The literature identifies a range of possible reasons. Yet despite considerable advances, the impact of international non-governmental organizations (INGOs) has yet to be considered. In fact, surprisingly, systematic analysis of the role of INGOs in the diffusion of economic openness, financial or otherwise, has not been pursued previously. We offer the first such analysis by advancing the idea of “climatic mimesis,” which refers to the cultural climate for policymaking that results from country ties to INGO. INGOs shape capital account regulation by altering the cultural climate in a country such that liberalization becomes a more problematic policy choice. Our statistical analysis of data from developing countries reveals that INGO-ties inhibited liberalization as did relatively high public debt and concentrated domestic banking sectors. The presence of an IMF program and liberalization by economic competitors encouraged it. We suggest these findings have important implications for understanding the potential for convergence and divergence in an era of globalization.