Do political institutions influence international trade? Measurement of institutions and the Long-Run effects

Astrid Krenz

No 276, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: The past literature presents ambiguous evidence about the bidirectional and causal influences between countries´ institutional framework and their trading activity. In our analysis, we investigate the relationship between institutions and trade constructing a measure of institutions from the information given by the International Country Risk Guide and using a methodology that can control for omitted variables bias, endogeneity in the regressors, as well as cross-country heterogeneity. We examine the long-run effects of the political institutional framework on trade for a panel of 87 countries for the period from 1990 to 2007. We employ recent panel econometric methods for testing and estimating in the presence of non-stationarity, investigate panel causality and use methods that are robust to slope heterogeneity. Our results imply that an improved political institutional framework is a cause of increased trading activity.

Keywords: political institutions; international trade; panel co-integration; cross-country heterogeneity (search for similar items in EconPapers)
JEL-codes: C10 F14 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:276

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