Domestic formal and informal institutions: their substitutability and comparative advantage

Se Mi Park ()
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Se Mi Park: University of Maryland, Baltimore County

Review of World Economics (Weltwirtschaftliches Archiv), 2023, vol. 159, issue 4, No 2, 853-886

Abstract: Abstract This paper empirically examines how country-specific formal and informal institutions affect export patterns. The index for formal institutional quality evaluates electoral rules, judicial independence, and other constraints on executives. The index for informal institutional quality comprises degrees of trust, control, and obedience. Using the revealed comparative advantage index, I find that countries with high-quality formal and informal institutions tend to have institutional comparative advantage. Results also suggest that formal and informal institutions substitute for one another in generating institutional quality. I find robust results even when controlling for an important potential source of reverse causality.

Keywords: Formal institutions; Informal institutions; Institutional comparative advantage (search for similar items in EconPapers)
JEL-codes: D02 F14 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10290-022-00483-0

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