The impact of leadership turnover on trading relations between states

We test how domestic political institutions moderate the effect of leadership turnover on relations between states. Deriving hypotheses from recent theoretical work, Bueno de Mesquita et al. and McGillivray and Smith, we examine how leader change affects trading relations between states using dyadic trade data. Consistent with hypotheses, we find that large winning coalition systems, such as democracies, are relatively immune from the vagaries of leadership change. In such systems, trade remains relatively constant whether leader change occurs or not. In contrast, when winning coalition size is small, as in autocratic states, leadership change profoundly alters relations, causing a decline in trade. Finally, we examine instances of poor relations, measured by a significant decline in trade compared to historical levels. As predicted, instances of poor relations are less common between pairs of democracies than other dyadic pairings. Further, leadership turnover in autocratic systems restores trading relations between states. The effect of leadership change in democracies is much less pronounced.