Institutions, Trade Policy and Trade Flows

21 Pages Posted: 7 Jul 2004

See all articles by Marion Jansen

Marion Jansen

International Trade Centre

Hildegunn Kyvik Nordås

Organization for Economic Co-Operation and Development (OECD)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2004

Abstract

This Paper analyses to which extent domestic institutions affect trade flows. We use two complementary approaches, one focusing on the size of total trade flows and one focusing on bilateral trade patterns (gravity equation). We also control for two other domestic policy variables: trade policy and domestic infrastructure. We find that the quality of institutions has a positive and significant impact on a country's level of openness. Domestic tariffs have no statistically significant impact alone, but do affect total trade flows when combined with good institutions. Domestic institutions also have a positive and significant impact on bilateral trade flows, but the parameter of our institution variables is reduced by almost a half and may turn insignificant when the quality of domestic infrastructure is included in the regression.

Keywords: Openness, bilateral trade flows, gravity model, institutional quality

JEL Classification: F10

Suggested Citation

Jansen, Marion and Nordås, Hildegunn Kyvik, Institutions, Trade Policy and Trade Flows (June 2004). Available at SSRN: https://ssrn.com/abstract=562424

Marion Jansen (Contact Author)

International Trade Centre ( email )

54-56 Rue de Montbrillant
Geneva
Switzerland

Hildegunn Kyvik Nordås

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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