Keeping Up WithWhichJoneses: Spatial Diffusion of Rule of Law Through Economic International Organizations

Abstract

I develop a theory of spatial policy diffusion, where "space" is conceptualized as shared memberships in economic international organizations (IOs). I argue diffusion is driven by two complementary causal mechanisms: competition and socialization. Outside evaluators, such as international leaders, activists, and most importantly, international firms and investors, often assess states' attractiveness as a business venue by comparing them to similar states. The natural reference group for such comparisons are not just geographical neighbors, but also states with shared memberships in economic IOs. Responding to this evaluation, states identify members of their own reference groups and view them as competition for investment. As a result, states within the same reference groups converge on issues related to lowering domestic economic risks, which are referred by the umbrella term "domestic rule of law." Socialization operates through norm entrepreneurs, who use the reference groups for both evaluation and access to their target audiences. Economic IOs provide particularly useful channels for socialization by maintaining permanent headquarters or hosting regular meetings among members. Likewise, norm entrepreneurs tend to target states with similar levels of economic development. I capture the theorized spatial processes using a multi-parametric spatio-temporal autoregressive model (m-STAR) and find support for the predictions.

The Rule of Law in the ESG Framework in the World Economy

“…Rule of law is a social determinant to promote better health systems, especially in African countries [15]. Countries that participate in international organizations can have economic incentive to strengthen rule of law to obtain greater Foreign Direct Investment-FDI [16]. There is a positive relationship between rule of law and economic growth in new EU member states and in Croatia in the period 1996-2012 [17].…”

Regional diffusion, EU conditionality and Council of Europe treaty ratification 1949–2016

“…Checkel (1999) describes diffusion as social practice and points to the example of the CoE contributing to domestic policy discussions in Germany. Chyzh (2017) shows the influence of membership in international (economic) organisations on spatial diffusion of rule of law.…”

Property Rights Regimes, Technological Innovation, and Foreign Direct Investment

“…While democracies and autocracies differ systematically in terms of property rights protections (Li 2006, 64), the two are not one-in-the-same. Distinctions between democracy and property rights protections are common within the democratization and rule of law literatures (e.g., Gibler and Randazzo 2011;Randazzo, Gibler and Reid 2016;Chyzh 2017). Rather than being nested within democratic institutions, democracy is neither a necessary nor sufficient condition for property right protections.…”

“…Consider the example of insurance law. A legal regime regarding insurance law is important given the degree of influence such firms have over economic transactions (Chyzh 2016, 410–11). It can be unclear if, and to what degree, insurance firms are liable to provide coverage to clients should technological changes alter the existing legal structure within a specific field.…”