a1 Pennsylvania State University, Email: email@example.com.
National economies are embedded in complex networks such as trade, capital flows, and intergovernmental organizations (IGOs). These globalization forces impose differential impacts on national economies depending on a country's network positions. This article addresses the policy convergence-divergence debate by focusing on how networks at the international level affect domestic fiscal, monetary, and regulatory policies. The author presents two hypotheses: first, similarity in network positions induces convergence in domestic economic policies as a result of peer competitive pressure. Second, proximity in network positions facilitates policy learning and emulation, which result in policy convergence. The empirical analysis applies a latent-space model for relational/dyadic data and indicates that position similarity in the network of exports induces convergence in fiscal and regulatory policies; position similarity in the network of transnational portfolio investments induces convergence in fiscal policies; and position proximity in IGO networks is consistently associated with policy convergence in fiscal, monetary, and regulatory policies.
Xun Cao is an assistant professor of political science at Pennsylvania State University and is affiliated with the Penn State Institutes of Energy and the Environment. His research interests include international and comparative political economy, environmental and energy politics, network analysis, and spatial models.
* I thank Peter Hoff, Mike Ward, and Anton Westveld for their suggestions and help on various aspects of network analysis and its application in political science. James Caporaso, Robert Keohane, Aseem Prakash, Hugh Ward, and Erik Wibbels read previous versions of this article and gave great comments to improve its theory and empirical analysis. I also thank the three reviewers and the editors from World Politics; Steven Bernstein, Christian Breunig, Lilach Gilady, David Lake, Helen Milner, Louis Pauly, Steve Pfaff, Katherine Stovel, Joseph Wong, Wendy Wong, and other participants of the inaugural meeting of the International Political Economy Society, Princeton University (November 17–18, 2006); and participants of the Faculty Colloquium in International Relations, Princeton University (November 26, 2007); the workshop on “Diffusion in the International Realm” in NCCR Democracy, University of Zurich, Switzerland (June 6, 2008); and at an invited talk in the Department of Political Science at the University of Toronto (January 25, 2010), for their timely and helpful comments.