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Prices, Politics, Institutions: Oil Exporters in the International Economy

Published online by Cambridge University Press:  20 January 2017

Kiren Chaudhry
Kiren Chaudhry*
Affiliation:
University of California, Berkeley
*
Department of Political Science, 210 Barrows Hall, University of California, Berkeley, Berkeley, CA 94720–1950, USA. Tel: 510-642-6323; E-mail: chaudhry@socrates.berkeley.edu
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Abstract

This essay tests the hypotheses and claims of models of internationalization that draw on neo-classical trade theory. Using the influential Frieden-Rogowski model, it examines the responses of Iraq and Algeria to the oil price shocks of the 1980s and 1990s. The cases demonstrate that even the most basic assumptions and predictions of this economistic model are flawed. The Frieden-Rogowski model misrepresents the mechanisms through which price shocks are translated into policy, makes inaccurate predictions about how terms of trade affect policy or sectoral performance, fails to explain the duration of lags between price changes and policy changes, and neglects important differences in a variety of major outcomes. I argue that even in the very similar cases of Algeria and Iraq, policy changed not in response to domestic pressures generated from changes in relative prices, but as a result of a severe fiscal crisis that stripped both governments of their ability to protect domestic constituents from world prices.

Type
Research Article
Information
Business and Politics , Volume 1 , Issue 3 , November 1999 , pp. 317 - 342
Copyright
Copyright © V.K. Aggarwal 1999 and published under exclusive license to Cambridge University Press 

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