External Incentives, Internal Change?

Abstract

This thesis examines the European Union’s democracy promotion by investigating the potential of its instrument Generalized Scheme of Preferences Plus (GSP+) to promote liberal democratization in developing countries. The democracy promotion potential of GSP+ has previously remained largely untested, despite incorporating theoretically grounded mechanisms from democracy promotion research. The study adopts a theoretical framework that combines three models of democracy promotion; linkage, leverage, and good governance — each operationalized and integrated as original statistical indices. Methodologically, the thesis adopts a mixed-method design combining Synthetic Control Method with two panel data estimators, complemented by Temporal trend comparison. This triangulated strategy strengthens causal identification and explanatory depth, attempting to address methodological challenges within the field. The results demonstrate a robust correlation between good governance and liberal democracy across countries, confirming theoretical arguments. Leverage shows moderate but less consistent correlations, while linkage, as operationalized, appears weak and insignificant. The counterfactual model employed for investigating the research question indicates that the effect of the GSP+ on liberal democracy is heterogeneous and ambiguous. In most countries, no significant impact is observed; in Armenia and Sri Lanka, a strong effect emerges, but its direct attribution to the GSP+ is uncertain. Only in Mongolia, out of seven cases, does the GSP+ demonstrate evidence of causality. Therefore, causal attribution remains uncertain due to contextual variation across countries. While the European Union’s GSP+ appears capable of amplifying reform processes, it does not demonstrate universal or distinct causal effect on liberal democracy, reaffirming the inherent challenges of democracy promotion efforts.