Is the legal framework quality a trade barrier? Evidence from transition countries

La qualité du cadre juridique constitue-t-elle une barrière au commerce ? Application aux économies en transition

José De Sousa () and Anne-Célia Disdier

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Abstract: This paper investigates the influence of the legal framework quality on trade. Our sample includes trade flows between European countries over the period 1995-1999. During this period, transition economies of Central and Eastern Europe have attempted to set up market-oriented legal systems to replace the administered legal control of the old planned economy. In spite of large efforts, their legal framework remains relatively weak in terms of enforcement of contracts, compared to Western European countries. There are three main contributions. First, we show that the legal framework quality is a significant determinant of trade decisions. Second, despite risk differentials between exporters and importers, they perceive similarly the influence of the legal framework quality of their trading partner. Lastly, the legal framework quality explains a part of the home bias mentioned in the literature.

Date: 2006
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Published in Revue Economique, 2006, 57 (1), pp.135-149

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02655863

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