Economic explorations in political risk, trade and commuting

This thesis explores a variety of topics in three separate studies. The first study looks at the effects that changes in a country's economic environment for foreign investment have on the ability of national political leaders to remain in power. Data from the public credit insurer, the Office National du Ducroire (ONDD), is used to identify periods of change in a country's behavior toward foreign investors between 1995-2008. A two-stage panel model is used to investigate whether political leaders are punished for policies that increase political risk ratings. The model shows that democratic incumbent leaders are more likely to be voted out of office when they create more hazardous economic environments for foreign investors. A modification of the model detects evidence of asymmetric voting behavior with regard to political risk rating changes, but not to changes in the GDP per capita or unemployment rate. The second study analyzes issues related to proximity, trade policy and trade motivations during the second half of the twentieth century (1950-2000). The gravity model used in Jacks et al. (2011) is modified and extended to test a new ``port-to-port'' distance measure and investigate the effects of transportation methods, membership in preferential trade agreements and the role of comparative advantage. For a more detailed examination, the final analysis divides the sample into two sub-periods (1950-1980 and 1981-2000). The main results highlight the importance of proximity and trade agreements to bilateral trade activities and indicate that the underlying motivations behind trade evolve with the conditions of the international marketplace. Specifically, while comparative advantage is found to be an important factor driving trade, its importance appears to diminish throughout the sample period The third study explores the impact of inter-regional commuters on their residential areas. An extended Carlino and Mills (1987) simultaneous equation growth model is used to examine the effects of the San Francisco Bay Area in-commuters on per capita income, employment and population growth in California Central Valley counties. The results indicate that commuters have a positive effect on population and per capita income growth, but a negative effect on employment growth.