Does the quality of political institutions affect intra-industry trade within trade blocs? The ASEAN perspective

Nusrate Aziz, Belayet Hossain and Irfan Mowlah

Applied Economics, 2018, vol. 50, issue 33, 3560-3574

Abstract: There has been a renewed resolve for deeper integration and cooperation within ASEAN. Intra-industry trade (IIT) is often viewed as a way of achieving economic as well as political integration. This article tests for the effect that political regime and governance may have on the intensity of IIT. We particularly examine if quality of political institutions which includes corruption and democracy indices as well as economic factors comprising corporate tax rate, regional FDI flow, flexibility of exchange rate regime, size of the market, economic distance affect the intensity of horizontal and vertical IIT. The study finds that control of corruption and good governance both increase the vertical IIT but not the horizontal IIT. The study further finds that intra-economy FDI flow, stable exchange rate regime, market size and proximity positively affect IIT within the trade bloc. However the negative effect of corporate tax rate suggests that if countries were to coordinate their tax policies, they could avoid harmful tax competition and promote IIT across their borders. The findings regarding the effect those economic and political factors have on the intensity of IIT certainly warrants the attention of policy makers and researchers alike.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2018.1430336 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:33:p:3560-3574

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2018.1430336

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().