Trade Liberalization and Institutional Quality: Evidence from Vietnam

Anh Dang

MPRA Paper from University Library of Munich, Germany

Abstract: Recent cross-country research shows that there is a causal relationship between trade liberalization and quality of institutions. The literature on cross-country studies has been criticized because differences in legal systems and other institutions across countries are difficult to control for. An in-depth case study of a particular country’s experience can provide a useful complement to cross-country regressions. Using the unique dataset from provincial competitiveness survey and a natural experiment from joining the World Trade Organization, I find that variations in economic institutions across provinces in Vietnam can be explained by trade liberalization. To overcome endogeneity problems, I use minimum distance from each province to main economic centres as an instrument for trade liberalization. The instrumental variable approach shows that the direction of influence is from greater openness to better institutions. The results hold after controlling for various additional covariates. It is also robust to various alternative measures of institutions. I also find that trade liberalisation has greater short term impacts on institutional quality in the Northern provinces.

Keywords: Trade liberalization; institutions; Vietnam (search for similar items in EconPapers)
JEL-codes: F1 O43 (search for similar items in EconPapers)
Date: 2010-04-14, Revised 2010-08-31
New Economics Papers: this item is included in nep-dev and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/31485/1/MPRA_paper_31485.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/38740/1/MPRA_paper_38740.pdf revised version (application/pdf)

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