Trade and harmonization: if your institutions are good, does it matter if they are different ?

Roumeen Islam and Ariell Reshef

No 3907, Policy Research Working Paper Series from The World Bank

Abstract: Good institutional quality (function) and similar institutional design (form) can promote international trade by reducing transactions costs. The authors evaluate the relative importance of function versus form in a gravity model, using an indicator of different legal systems as a proxy for differences in form, together with indicators of overall institutional quality. They find that good institutions promote trade much more than similar legal systems and have much more explanatory power. This effect is economically large-up to 10 times the effect of different legal systems. Moreover, better infrastructure matters as much as good institutions.

Keywords: Legal Products; Trade Law; Economic Theory&Research; Transport and Trade Logistics; Common Carriers Industry (search for similar items in EconPapers)
Date: 2006-05-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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