How do shifts in the global balance of power affect the world economy? Why does the presence of a hegemon (a dominant power) seem to support globalization?
In Barcelona School of Economics Working Paper 1504, “Hegemonic Globalization,” Fernando Broner, Alberto Martin, Josefin Meyer, and Christoph Trebesch develop a new theoretical framework to understand how hegemonic power shapes global economic integration.
To explore these questions empirically, the authors assemble a new database covering 200 years of international treaties. Using this novel database, they show that, consistent with the theory, hegemons account for a disproportionate share of global treaty activity and treaty-signing is a leading indicator of increases in bilateral trade.
Over 200 Years of Treaty Data
A central contribution of the paper is the construction of a novel database of international treaties between 1800 and 2020. The database draws on multilateral and country-specific treaty sources that is as complete as realistically possible, or a “near-universe” of the treaties from this period.
The data reveal several striking patterns:
- A long-term rise in treaty making
International agreements increased steadily from 1800 onward (Figure 1 below) - But with sharp interruptions
This long-run trend is punctuated by major collapses in treaty activity, most notably during World War I, World War II, and, more recently, beginning in the early 2000s; the current decline is proportionally similar to those seen during the World Wars - An economic focus of treaty-making
Since WWII, roughly 65% of all treaties concern economic issues such as trade, investment, and taxation
A Theoretical Framework of Hegemonic Globalization
The paper develops a novel framework to understand the relationship between hegemonic power and globalization. The theory rests on two core premises:
- Countries have heterogeneous preferences over policies, such as the type of government (democracy versus autocracy) and industry standards
- Trade between any two countries increases in the similarity of their policies, because policy alignment reduces cross-border transaction-costs
The presence of a hegemon (a large economy) prompts alignment in policies and facilitates the transition to a globalized world. Furthermore, a country’s decision to align with the hegemon depends not only on bilateral considerations, but also on the choices of all other countries. This gives rise to strategic complementarities.
By contrast, a shift towards a multipolar world can instead threaten globalization. If a rising hegemon has preferences over policies that are different from those of the incumbent hegemon, once it becomes sufficiently large it may choose to move away from the existing equilibrium. This realignment alters the incentives of all other countries and can fragment the world economy, benefitting some countries and harming others.
Hegemons Foster Alignment and International Trade
Hegemons appear to induce alignment as measured through treaty signing (see Table 1 below). Hegemonic power is proxied by the Global Power Index (GPI) of Moyer, Markle, Meisel, and Szymanski-Burgos (2024). The GPI measures relative national power on a scale from zero (no global power) to 100 (full global power). As the table shows, hegemons sign a disproportionate share of treaties, even after controlling for their economic and demographic weight.
In terms of the size of the effect, the coefficients on the hegemon dummy in Columns 1 and 2 imply that hegemonic status increases a country’s share of global treaties by 5 to 8 percentage points. Column 3 shows that a one percentage point increase in GPI is associated with a 0.3 percentage point increase in the share of global treaties signed.
Note: The dependent variable measures each country’s share of newly signed treaties worldwide per decade. The hegemony dummy in Column (1) is equal to one for countries with a Global Power Index (GPI) above 10 (as measured in Figure 15). The hegemony dummy in Column (2) is equal to 1 for the UK 1830-1919 and for the US 1940-2020. Column (3) uses the continuous GPI measure (HP trend). All regressions include country and year fixed effects.
Beyond treaty formation, the authors document that alignment is associated with more trade. Countries that sign more treaties with each other subsequently trade more, both bilaterally and indirectly. Alignment with a major power not only boosts trade with that power but also with other countries that are aligned with it, consistent with the model’s prediction of bloc-like dynamics. These findings still hold even after taking into account many other factors that could influence the results.
Conclusions
The paper develops a new framework to understand how hegemonic power shapes globalization and explores its implications empirically with a rich new dataset of international treaties.
The empirical evidence supports the theory’s key implications. Namely, hegemons drive a disproportionate share of global treaty making, and bilateral treaty signing is strongly associated with more trade.
As global power structures evolve—especially amid rising multipolarity—the findings highlight the central role of political alignment in shaping future patterns of economic integration.
Key Findings
- The existence of a large, dominant economy prompts alignment in policies and increases global trade
- The shift to a fragmented, multipolar world is especially costly for the previous hegemon and its allied economies
- Rivalry between hegemonic powers leads to lower global trade and welfare
