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Does Trade Foster Institutions? An Empirical Assessment

Marcella Nicolini and Alessia Paccagnini

Review of Economics and Institutions, 2011, vol. 2, issue 2

Abstract: The relationship between trade and institutions has been extensively debated by trade economists and political scientists. The aim of the present paper is to provide some empirical evidence on the causal relationship between institutions and trade flows in a panel framework. We present a Granger causality test (1969) as well as a Hurlin and Venet (2001) test for panel data using a bilateral trade flows panel that covers 29 years. The issue of zero flows of trade is handled by using a panel Poisson Pseudo-Maximum Likelihood estimator.

Keywords: institutional quality, Granger causality test; panel data; zero trade flows (search for similar items in EconPapers)
JEL-codes: F10 C10 (search for similar items in EconPapers)
Date: 2011
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