Economic Channels for Influence Over Governments

This dissertation focuses on how economic markets provide channels for influence over government policy. Specifically, I examine three levels of analysis: the household, the financial security, and the foreign state. Economic constraints on government policy are particularly salient in today's financialized economy. Understanding these dynamics helps us forecast what will happen in the future. Getting these forecasts right is important because taxpayers, governments, and investors all have skin in the game of effective use of government resources. To paint a picture of these constraints, my dissertation contains three papers. The first argues that individuals with access to economic insurance are less likely to protest than those without. Using macroeconomic and survey data, I find evidence supporting my theoretical expectations. The second paper turns from household economics to the financial markets for government debt securities. Although the literature shows how governments make certain choices in debt issuance and the pricing dynamics of government bonds, it remains unclear how the ownership structure of debt affects yields. I argue that government bonds with more concentrated ownership structures have higher price volatility, which should incur volatility risk premium as a result. I find evidence supporting my theoretical expectations. This paper speaks to the relationship between debt ownership and power; it matters because governments with more concentrated debt ownership could see higher debt service payments over time. The third paper considers how state actors can use foreign investment as a policy tool. I argue that Chinese actors increase investment in target countries when future policy is more uncertain because investments act as a hedge against the possibility of unfavorable future policy. This runs counter to the traditional narrative, which suggests that foreign investment is more likely when policy is stable. Using a novel cross-national, high-frequency, machine-coded event data set, I find evidence supporting my expectations. My dissertation paints a picture of the breadth of ways that economic markets influence government policy. Governments contend with the economic interests of constituents who can demonstrate publicly, investors who can affect the price of their debt, and other states that can use investment to secure influence over future policy.