Infrastructure quality and trade liberalization

Jang Ping Thia and Anne Ong Lopez

Structural Change and Economic Dynamics, 2023, vol. 66, issue C, 134-150

Abstract: It is difficult to establish the impact infrastructure has on trade balances due to confounding factors. Our empirical approach leverages on episodes of trade liberalization, interacting such episodes with infrastructure. Providing a simple extension to the gravity model, we find that infrastructure quality differences between trade partners result in trade imbalances, which liberalization then accentuates. For robustness checks, we interact the liberalization indicator against other confounding variables and do not find such consistent effects. We conclude that lack of quality infrastructure in developing economies contributes to larger trade deficits, and infrastructure development should be supported alongside trade liberalization.

Keywords: Infrastructure; Gravity model; Trade; Trade deficits (search for similar items in EconPapers)
JEL-codes: F14 F40 O18 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:66:y:2023:i:c:p:134-150

DOI: 10.1016/j.strueco.2023.04.012

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