Social scientists have sketched four distinct theories to explain a phenomenon that appears to have ramped up in recent years, the diffusion of policies across countries. Constructivists trace policy norms to expert epistemic communities and international organizations, who define economic progress and human rights. Coercion theorists point to powerful nation-states, and international financial institutions, that threaten sanctions or promise aid in return for fiscal conservatism, free trade, etc. Competition theorists argue that countries compete to attract investment and to sell exports by lowering the cost of doing business, reducing constraints on investment, or reducing tariff barriers in the hope of reciprocity. Learning theorists suggest that countries learn from their own experiences and, as well, from the policy experiments of their peers. We review the large body of research from sociologists and political scientists, as well as the growing body of work from economists and psychologists, pointing to the diverse mechanisms that are theorized and to promising avenues for distinguishing among causal mechanisms.
Political scientists, sociologists, and economists have all sought to analyze the spread of economic and political liberalism across countries in recent decades+ This article documents this diffusion of liberal policies and politics and proposes four distinct theories to explain how the prior choices of some countries and international actors affect the subsequent behavior of others: coercion, competition, learning, and emulation+ These theories are explored empirically in the symposium articles that follow+ The goal of the symposium is to bring quite different and often isolated schools of thought into contact and communication with one another, and to define common metrics by which we can judge the utility of the contending approaches to diffusion across different policy domains+The worldwide spread of economic and political liberalism was the defining feature of the late twentieth century+ Free-market-oriented economic reformsmacroeconomic stabilization, liberalization of foreign economic policies, privatization, and deregulation-took root in many parts of the world+ At more or less the same time, a "third wave" of democratization and liberal constitutionalism washed over much of the globe+ Most economists believe the gains to developing countries from the liberalization of economic policies to be in the hundreds of billions of dollars+ But they also acknowledge the instability and human insecurity sometimes left in liberalization's wake+ 1 Political scientists argue that the rise of democracy has contributed to the betterment of both human rights and international security+ 2 While the precise effects of these twin waves of liberalization are still debated, it is hard to deny that they have had a tremendous impact on the For helpful comments on an earlier draft of this article, the authors wish to thank
Over the past forty-five years, bilateral investment treaties~BITs! have become the most important international legal mechanism for the encouragement and governance of foreign direct investment+ The proliferation of BITs during the past two decades in particular has been phenomenal+ These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute+ How can we explain the widespread adoption of BITs? We argue that the spread of BITs is driven by international competition among potential host countries-typically developing countries-for foreign direct investment+ We propose a set of hypotheses that derive from such an explanation and develop a set of empirical tests that rely on network measures of economic competition as well as more indirect evidence of competitive pressures on the host to sign BITs+ The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so+ We find some evidence that coercion and learning play a role, but less support for cultural explanations based on emulation+ Our main finding is that the diffusion of BITs is associated with competitive economic pressures among developing countries to capture a share of foreign investment+ We are agnostic at this point about the benefits of this competition for development+ The global market for productive capital is more integrated than ever before+ The growth of foreign direct investment~FDI! is a clear example+ According to World Bank data, gross FDI as a percentage of total world production increased sevenfold from 1+2 percent to 8+9 percent between 1970 and 2000+ Though such investments tend to be highly skewed across jurisdictions-developed countries account For useful comments on earlier drafts of this article, we thank Bill Bernhard, Bear Braumoeller,
This article makes a conceptual and theoretical contribution to the study of diffusion. The authors suggest that the concept of diffusion be reserved for processes (not outcomes) characterized by a certain uncoordinated interdependence. Theoretically, the authors identify the principal sources of clustered policy reforms. They then clarify the characteristics specific to diffusion mechanisms and introduce a categorization of such processes. In particular, they make a distinction between two types of diffusion: adaptation and learning. They argue that this categorization adds conceptual clarity and distinguishes mechanisms with distinct substantive consequences.
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