The Gravity of Institutions in Resource-Rich Country

22 Pages Posted: 29 Mar 2015

See all articles by Ayaz Zeynalov

Ayaz Zeynalov

CERGE-EI, Charles University in Prague

Date Written: March 28, 2015

Abstract

This research analyzes the effects of the similarities in economic size and institutional level on bilateral trade. It is interested, whether the similarities at the country size and institutional level encourage enlarging volume of international trade between countries. Using panel data of the bilateral trade of Azerbaijan with 50 different countries from 1995 to 2012 estimating by the GEE Population-averaged method, it has been found that similarity at the income size is not necessary for increasing bilateral trade across countries, on the contrary, country has interest to trade with dissimilar economic-size countries. The influence of institutions plays a pivotal role on bilateral trade between countries. It is confirmed that institutional similarity tends to increase bilateral trade: reliable countries tend to trade more between each other, and less with unreliable one.

Keywords: international trade, gravity model, economic growth, institutions

JEL Classification: F14; P33; P48

Suggested Citation

Zeynalov, Ayaz, The Gravity of Institutions in Resource-Rich Country (March 28, 2015). Available at SSRN: https://ssrn.com/abstract=2586494 or http://dx.doi.org/10.2139/ssrn.2586494

Ayaz Zeynalov (Contact Author)

CERGE-EI, Charles University in Prague ( email )

Politichych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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