Title: Does institutional quality matter for trade? Institutional conditions in a sectoral trade framework
Authors: ÁLVAREZ-AYUSO INMACULADA C.BARBERO JIMENEZ JAVIERRODRIGUEZ-POSE ANDRÉSZOFÍO JOSE L.
Citation: WORLD DEVELOPMENT vol. 103 p. 72-87
Publisher: PERGAMON-ELSEVIER SCIENCE LTD
Publication Year: 2018
JRC N°: JRC106552
ISSN: 0305-750X
URI: https://www.sciencedirect.com/science/article/pii/S0305750X17303248
http://publications.jrc.ec.europa.eu/repository/handle/JRC106552
DOI: 10.1016/j.worlddev.2017.10.010
Type: Articles in periodicals and books
Abstract: This article examines the extent to which national institutional quality affects bilateral sectoral trade flows, as well as whether the conditioning role of institutions for trade has been waxing or waning with time. Based on a new trade theory framework, we derive a sectoral gravity equation, including novel variables corresponding to the exporter’s labor competitiveness levels, along with importer’s price indices and sectoral incomes, and analyze industry-specific bilateral trade flows of 186 countries for the period 1996–2012. We address potential endogeneity and econometric drawbacks by means of the Poisson Pseudo-Maximum Likelihood estimation methods. The results indicate that both the institutional conditions at destination and the institutional distance between exporting and importing countries are relevant factors for bilateral trade. Moreover, the effect associated with institutional conditions at destination moderately increases over time. This is a robust outcome across economic sectors, with higher values for agriculture and raw materials than for manufacturing and services.
JRC Directorate:Growth and Innovation

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