Institutions, Trade and Development: A Quantitative Analysis

64 Pages Posted: 7 May 2018

See all articles by Cosimo Beverelli

Cosimo Beverelli

World Trade Organization (WTO); European University Institute

Alexander Keck

World Trade Organization (WTO)

Mario Larch

University of Bayreuth - Faculty of Law, Business and Economics; University of Bayreuth; CESifo; Ifo Institute for Economic Research; GEP at the University of Nottingham; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Yoto Yotov

Drexel University - Department of Economics & International Business

Date Written: March 05, 2018

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. 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

JEL Classification: F130, F140, F160

Suggested Citation

Beverelli, Cosimo and Keck, Alexander and Larch, Mario and Yotov, Yoto, Institutions, Trade and Development: A Quantitative Analysis (March 05, 2018). CESifo Working Paper Series No. 6920. Available at SSRN: https://ssrn.com/abstract=3167749

Cosimo Beverelli

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
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European University Institute ( email )

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Alexander Keck

World Trade Organization (WTO) ( email )

154 Rue de Lausanne
CH-1211 Geneva 21
Switzerland

Mario Larch (Contact Author)

University of Bayreuth - Faculty of Law, Business and Economics ( email )

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Bayreuth, 95447
Germany
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University of Bayreuth ( email )

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Bayreuth, D-95447
Germany

CESifo ( email )

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Ifo Institute for Economic Research ( email )

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GEP at the University of Nottingham ( email )

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Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

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Yoto Yotov

Drexel University - Department of Economics & International Business ( email )

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Philadelphia, PA 19104
United States

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