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Institutional Determinants of Bilateral Trade: An Analysis according to Product Type

Author

Listed:
  • Gert-Jan M. Linders

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Henri L.F. de Groot

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Piet Rietveld

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

Formal trade barriers and transport costs explain only part of the resistance to international trade. Search costs on the international market and insecurity of property rights and contract enforcement have recently been emphasized as important intangible barriers to trade. This paper proposes that the impact of institutional quality on bilateral trade varies depending on the type of product that is being traded. Distinguishing between homogeneous and differentiated product groups, we estimate gravity equations to investigate how trade patterns are affected by variation in the quality of institutions across countries. The results show that institutions matter most for trade in differentiated goods. This variation in the importance of property security for trade underlines the relevance of search costs and other transaction-specific investments for understanding variation in bilateral trade patterns.

Suggested Citation

  • Gert-Jan M. Linders & Henri L.F. de Groot & Piet Rietveld, 2005. "Institutional Determinants of Bilateral Trade: An Analysis according to Product Type," Tinbergen Institute Discussion Papers 05-023/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20050023
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    Citations

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    Cited by:

    1. Ion MUȘCHEI, 2019. "The relationship between institutions and trade, empirical analysis from the Republic of Moldova case," Eastern European Journal for Regional Studies (EEJRS), Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM), vol. 5(2), pages 4-23, December.
    2. Jienwatcharamongkhol, Viroj, 2012. "Distance Sensitivity of Export: A Firm-Product Level Approach," Working Papers 2012:33, Lund University, Department of Economics.
    3. Usman Khalid, 2017. "The effect of trade and political institutions on economic institutions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(1), pages 89-110, January.
    4. Avinash Dixit, 2011. "International Trade, Foreign Direct Investment, and Security," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 191-213, September.
    5. Khalid, Usman, 2015. "Why Trading with Dictators May Nevertheless Help the People: On the Interplay between Trade, Political Regimes and Economic Institutions," Working Papers 2015:15, Lund University, Department of Economics, revised 23 Jul 2015.
    6. Viroj Jienwatcharamongkhol, 2014. "Distance Sensitivity of Export: A Firm-Product Level Approach," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 531-554, December.
    7. Bengt Söderlund & Patrik Tingvall, 2014. "Dynamic effects of institutions on firm-level exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 277-308, May.
    8. Frank A.G. den Butter & Raphie Hayat, 0000. "Trade between China and the Netherlands: a Case Study of Globalization," Tinbergen Institute Discussion Papers 08-016/3, Tinbergen Institute.
    9. Angeles, Luis, 2012. "Is there a role for genetics in economic development?," SIRE Discussion Papers 2012-08, Scottish Institute for Research in Economics (SIRE).
    10. Othmani, Abdelhafidh & Slimani, Slah & Bakari, Sayef, 2015. "Les Effets de la Corruption sur le Commerce Extérieur de la Tunisie : Une Approche du Modèle de Gravité Statique durant la Période 1999-2012," MPRA Paper 80894, University Library of Munich, Germany.
    11. Othmani, Abdelhafidh & Slimani, Slah & Bakari, Sayef, 2015. "Les Effets de la Concurrence sur le Commerce Extérieur de la Tunisie : Une Approche du Modèle de Gravité Statique durant la Période 1999-2012 [The Effects of Competition on Foreign Trade in Tunisia," MPRA Paper 80885, University Library of Munich, Germany.

    More about this item

    Keywords

    bilateral trade; gravity model; institutions; trade costs; product type;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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