Democracy and Trade: An Empirical Study

Jamus Lim and Jessica Henson Decker

MPRA Paper from University Library of Munich, Germany

Abstract: The theoretical discussion on globalization has suggested that there are linkages between democracy and trade, although the direction of influence is less certain. Formal empirical studies remain scarce, and have often focused on the question of whether democratic regimes influence trade policy, as opposed to the actual relationship between democracy and trade. This paper seeks to answer the question, ``Do democracies trade more?'' by applying the gravity equation to a large dataset of bilateral trade data for the period 1948-1999, while taking into account the role of democracy. It finds that democracy has a positive effect on trade flows, but only after controlling for trade pair heterogeneity. In addition, it makes the case for studies of this nature to draw a distinction between trade flows in the pre- and post-1990s period of rapid democratization as well as between developed and developing countries.

Keywords: Democracy; trade; gravity model (search for similar items in EconPapers)
JEL-codes: F13 P51 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-int and nep-pol
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Democracy and trade: an empirical study (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:6077

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