Iain Osgood (Michigan) and ByungKoo Kim (Michigan)
Uncovering and Explaining Strategies of Global Economic Engagement
Abstract
One of the most fundamental economic policy choices a society makes is how to order its economic relations with the world. What models do states use to structure this multi-faceted decision, and how do they choose among these alternatives? We combine data on trade policies, foreign investment, the exchange rate, capital flows, and international treaties to discover states’ strategies of global economic engagement. Dynamic clustering suggests five distinct strategies which describe coherent models that are prima facie valid across time and space. We examine the economic and political drivers of states’ choices among these competing strategies, focusing on the tradeoffs between public and private goods activated by differing styles of openness. In particular, we uncover a production-focused and risk-heavy model of global integration favored by non-democracies, and cautious (and insular) models of semi-globalization favored by (large) democracies. Decisions over global economic engagement are more than a binary choice or a single issue dimension, but nonetheless can be systematically described and explained by fundamental features of states’ political economies.