Institutions, Trade and Development: A Quantitative Analysis

Cosimo Beverelli (), Alexander Keck (), Mario Larch and Yoto Yotov
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Alexander Keck: World Trade Organization, Postal: Economic Research and Statistics Division, World Trade Organization

No 2018-3, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: We propose and apply methods to quantify the impact of national institutions on international trade and development. We are able to identify the direct impact of country-specific institutions on international trade within the structural gravity framework. Our approach naturally addresses the prominent issue of endogenous institutions. The empirical analysis offers robust evidence that stronger institutions promote trade. %Furthermore, we find that better institutions have a stronger impact on the imports of poor nations from rich countries than on their exports to rich countries. A series of sensitivity experiments confirm the robustness of our findings. A counterfactual analysis reveals that the changes in institutional quality in the poor countries in our sample between 1996 and 2006 have had, via their impact on imports from rich countries, significant and heterogeneous real GDP effects, varying between -5 and 5 percent. Our methods are readily applicable to identifying the impact of a wide range of country-specific variables on international trade.

Keywords: Institutional Quality; International Trade; Development; Structural Gravity (search for similar items in EconPapers)
JEL-codes: F10 F14 F16 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2018-02-26
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (76)

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Working Paper: Institutions, Trade and Development: A Quantitative Analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2018_003

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