Trade Globalization and Political Liberalization: A Gravity Approach

TIGER Working Paper No. 104

50 Pages Posted: 6 Jun 2006

See all articles by Miaojie Yu

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Date Written: July 2007

Abstract

The literature has paid very little attention to a potential positive endogenous nexus between trade globalization and political liberalization. In this paper, I apply a structural approach to investigate two-way causality between the two based on the gravity trade theory, using data from a sample of 134 IMF countries over the period 1974-1998. An extensive search shows that trade globalization dampens political liberalization, though political liberalization fosters trade globalization. The paper also presents ample evidence of simultaneous bias when such bidirectional causality is ignored. Finally, it contains a thorough exploration of parameter heterogeneity by income and by region.

Keywords: Trade, Democracy, Gravity Equation

JEL Classification: F13, F14, P16

Suggested Citation

Yu, Miaojie, Trade Globalization and Political Liberalization: A Gravity Approach (July 2007). Available at SSRN: https://ssrn.com/abstract=906280 or http://dx.doi.org/10.2139/ssrn.906280

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

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