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Does Trade Foster Institutions? An Empirical Assessment

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  • Marcella Nicolini
  • Alessia Paccagnini

Abstract

The relationship between trade and institutions has been extensively debated by trade economists and political scientists. The aim of the present paper is to provide some empirical evidence on the causal relationship between institutions and trade flows in a panel framework. We present a Granger causality test (1969) as well as a Hurlin and Venet (2001) test for panel data using a bilateral trade flows panel that covers 29 years. The issue of zero flows of trade is handled by using a panel Poisson Pseudo-Maximum Likelihood estimator.

Suggested Citation

  • Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions? An Empirical Assessment," Open Access publications 10197/7585, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/7585
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    File URL: http://hdl.handle.net/10197/7585
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    Cited by:

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    3. Krenz, Astrid, 2016. "Do political institutions influence international trade? Measurement of institutions and the Long-Run effects," University of Göttingen Working Papers in Economics 276, University of Goettingen, Department of Economics.
    4. Law, Siong Hook & Lim, Thong Cheen & Ismail, Normaz Wana, 2013. "Institutions and economic development: A Granger causality analysis of panel data evidence," Economic Systems, Elsevier, vol. 37(4), pages 610-624.
    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. Moon Jung Choi & Kee Hoon Chung, 2022. "Trade patterns and institutional change in East Asia," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(3), pages 567-595, July.
    7. Astrid Krenz & Ana Abeliansky, 2015. "Democracy and Trade—Evidence along the Distribution of Trading Activity," EcoMod2015 8750, EcoMod.
    8. Saad, Ayhab F., 2021. "Institutional change in the global economy: How trade reform can be detrimental to welfare," Economic Modelling, Elsevier, vol. 95(C), pages 97-110.

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    More about this item

    Keywords

    Institutional quality; Granger causality test; Panel data; Zero trade flows;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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