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POLITICAL INSTABILITY: THE NEIGHBOR VS. THE PARTNER EFFECT

Abstract

This paper investigates the impact of geographical neighbors on the political instability of a country and the role of a country’s international relations in shaping the impact of its geographical neighbors. First, we show that political instability in neighbor countries has a strong positive impact on a given country’s political instability. Second, we test whether international relations can reduce this impact of geographical neighbors. We find that more active participation in international governmental organizations is associated with lower impact of neighbor countries’ political instability on a given country’s political instability. Moreover, a country’s dependence on its neighbors can be reduced when six or more main trade partners are non-neighbors. Our results indicate that international relations can be an efficient counterforce to the so-called “neighbor’s curse.”

Keywords: political instability; geographical neighbors; neighborhood effect; international relations; trade partners.