The literature on the causes of democratization frequently claims that integration into international markets helps to build democracy. In contrast to that the empirical record shows that although the extent of international trade increased rapidly between 1950 and 2000, the majority of the observed regime transitions did not establish democratic rule but various types of authoritarianism. This study focuses on this puzzle and employs a game theoretic model that explicitly accounts for democratization and developments towards authoritarianism. Relying on an unconventional measure of regime change that considers any extent of institutional alterations, it can be shown that strongly integrated authoritarian regimes are less likely to develop towards democracy. While less integrated regimes rather democratize, increasing levels of integration into global markets are likely to stabilize authoritarianism. Moreover, if integrated regimes alter, they are more likely to shift towards stricter authoritarianism.

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