Erik Wibbels, Dependency revisited: International markets, business cycles and social spending in the developing world” International Organization 60 (2006), pp. 433-468.

Summary:  Looks to emphasize the role of international markets in shaping macroeconomic contexts and the interests of domestic actors. The international economy affects social spending in developing nations in three ways: 1) Increased trade exposure and foreign capital dependence contribute to significant business cycles; 2) sharp business cycles contribute to procyclical social spending by virtue of developing nations’ limited access to international credit markets during economic downturns; and 3) the severity of the business cycle combined with a limited capacity to finance deficits accentuates the policy trade-offs of domestic actors in the tradables sector.  Or, in English, developing countries aren’t able to generate revenue during downturns (by, say turning to a credit market) to pay for social policies, the result being that they tend to make cuts to these programs precisely when they are needed most.

 

 

_Important Insight: _ Domestic policies are constrained by international factors

 

_Methodology: _ Taking a perspective informed by dependency theory, investigates the constraints imposed on domestic economies due to the functioning of international markets.

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