IDEAS home Printed from https://ideas.repec.org/a/aes/amfeco/v23y2021i56p276.html
   My bibliography  Save this article

The Governance Impact on the Romanian Trade Flows. An Augmented Gravity Model

Author

Listed:
  • Anca Tamas

    (University of Economic Studies, Bucharest, Romania)

  • Dumitru Miron

    (University of Economic Studies, Bucharest, Romania)

Abstract

The aim of this paper is to assess the impact of the quality of the Romanian governance process on the trade with EU countries between 2007 and 2018 using an augmented gravity model. The panel data method was used in order to cope with heteroskedasticity. The sample covers 12 years and includes 27 EU partner countries, chosen because Romania traded with all of them, therefore the zero problem was naturally solved. EViews 10 was used for regression. Cross-section SUR option was used. The six governance indicators were used: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, control of corruption. The traditional variables (GDP, population, distance, common border, common language) had the expected signs and values. The following governance indicators proved to be significant for exporter countries: control of corruption with a negative influence, government effectiveness and political stability with a positive influence, Romanian political stability with a negative impact, Romanian rule of law with negative influence and Romanian regulatory quality with a positive impact, while the other indicators had a negative influence. The voice and accountability is not significant for exporter countries. An increase with 1% of the values of the government indicators would lead to significant increases of Romanian exports. The greatest impact on the exports would be the improvement of Romanian regulatory quality. The low quality of the Romanian institutions proved to be a major barrier in trading with EU countries. Therefore, an improvement of the Romanian institutions would unleash the trade between Romania and the other EU countries.

Suggested Citation

  • Anca Tamas & Dumitru Miron, 2021. "The Governance Impact on the Romanian Trade Flows. An Augmented Gravity Model," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 23(56), pages 276-276, February.
    • Handle: RePEc:aes:amfeco:v:23:y:2021:i:56:p:276
    as

    Download full text from publisher

    File URL: http://www.amfiteatrueconomic.ro/temp/Article_2993.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1, March.
    2. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    3. Vêlayoudom Marimoutou & Denis Peguin & Anne Peguin-Feissolle, 2009. "The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?," Economics Bulletin, AccessEcon, vol. 29(2), pages 1139-1155.
    4. Peter Egger & Kevin Staub, 2016. "GLM estimation of trade gravity models with fixed effects," Empirical Economics, Springer, vol. 50(1), pages 137-175, February.
    5. Gabriel Felbermayr & Jasmin Katrin Gröschl & Inga Heiland, 2018. "Undoing Europe in a New Quantitative Trade Model," ifo Working Paper Series 250, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    6. repec:onb:oenbwp:y::i:56:b:1 is not listed on IDEAS
    7. Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2004. "Governance Matters III: Governance Indicators for 1996, 1998, 2000, and 2002," The World Bank Economic Review, World Bank, vol. 18(2), pages 253-287.
    8. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp183, IIIS.
    9. Inmaculada Martínez‐Zarzoso & Laura Márquez‐Ramos, 2019. "Exports and governance: Is the Middle East and North Africa region different?," The World Economy, Wiley Blackwell, vol. 42(1), pages 143-174, January.
    10. Henri L. F. De Groot & Gert‐Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, February.
    11. Jansen, Marion & Nordås, Hildegunn Kyvik, 2004. "Institutions, trade policy and trade flows," WTO Staff Working Papers ERSD-2004-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    13. Baltagi, Badi H., 2015. "The Oxford Handbook of Panel Data," OUP Catalogue, Oxford University Press, number 9780199940042, Decembrie.
    14. Gert-Jan M. Linders & Arjen Slangen & Henri L.F. de Groot & Sjoerd Beugelsdijk, 2005. "Cultural and Institutional Determinants of Bilateral Trade Flows," Tinbergen Institute Discussion Papers 05-074/3, Tinbergen Institute.
    15. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    16. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
    17. Priya Ranjan & Jae Young Lee, 2007. "Contract Enforcement And International Trade," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 191-218, July.
    18. Setyastuti, Rini & Adiningsih, Sri & Widodo, Tri, 2018. "The Role of Governance Quality in Increasing Intra-ASEAN Trade," MPRA Paper 85258, University Library of Munich, Germany.
    19. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," The World Bank Research Observer, World Bank, vol. 15(1), pages 99-135, February.
    20. Gopinath, G. & Helpman, . & Rogoff, K. (ed.), 2014. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 4, number 4.
    21. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-1229, December.
    22. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    23. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    24. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
    25. Thorvaldur Gylfason & Inmaculada Martínez-Zarzoso & Per Magnus Wijkman, 2015. "Free Trade Agreements, Institutions and the Exports of Eastern Partnership Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 53(6), pages 1214-1229, November.
    26. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    27. Mehmet Huseyin Bilgin & Giray Gozgor & Ender Demir, 2018. "The determinants of Turkey's exports to Islamic countries: The impact of political risks," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(5), pages 486-503, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Álvarez, Inmaculada C. & Barbero, Javier & Rodríguez-Pose, Andrés & Zofío, José L., 2018. "Does Institutional Quality Matter for Trade? Institutional Conditions in a Sectoral Trade Framework," World Development, Elsevier, vol. 103(C), pages 72-87.
    2. Mehmet Huseyin Bilgin & Giray Gozgor & Chi Keung Marco Lau, 2017. "Institutions and gravity model: the role of political economy and corporate governance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 421-436, December.
    3. Tanya GANDHI & Shahid AHMED, 2020. "Testifying the role of regulatory environment in trade facilitation: Impact on intra-regional trade in South-Asia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(625), W), pages 195-216, Winter.
    4. Wessel, Jan, 2019. "Evaluating the transport-mode-specific trade effects of different transport infrastructure types," Transport Policy, Elsevier, vol. 78(C), pages 42-57.
    5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    6. Carlos Abreo & Ricardo Bustillo & Carlos Rodriguez, 2021. "The role of institutional quality in the international trade of a Latin American country: evidence from Colombian export performance," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-21, December.
    7. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    8. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    9. Gani, Azmat & Scrimgeour, Frank, 2016. "New Zealand's trade with Asia and the role of good governance," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 36-53.
    10. Tamaş Anca, 2020. "Why should the gravity model be taught in business education?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 14(1), pages 422-433, July.
    11. Martin Grančay & Nóra Grančay & Jana Drutarovská & Ladislav Mura, 2015. "Gravitačný model zahraničného obchodu českej a slovenskej republiky 1995-2012: ako sa zmenili determinanty obchodu? [Gravity Model of Trade of the Czech and Slovak Republics 1995-2012: How Have Det," Politická ekonomie, Prague University of Economics and Business, vol. 2015(6), pages 759-777.
    12. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    13. Magerman, Glenn & Studnicka, Zuzanna & Van Hove, Jan, 2016. "Distance and border effects in international trade: A comparison of estimation methods," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-31.
    14. Stephan Klasen & Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & Matthias Bruckner, 2021. "Does the designation of least developed country status promote exports?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(2), pages 157-177, February.
    15. 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.
    16. Estrella Gómez-Herrera, 2013. "Comparing alternative methods to estimate gravity models of bilateral trade," Empirical Economics, Springer, vol. 44(3), pages 1087-1111, June.
    17. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    18. Fuchs, Michaela & Wohlrabe, Klaus, 2008. "Institutions, trade, and integration: what can be expected within the enlarged EU?," Dresden Discussion Paper Series in Economics 16/08, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    19. Zsoka Koczan & Alexander Plekhanov, 2013. "How important are non-tariff barriers? Complementarity of infrastructure and institutions of trading partners," Working Papers 159, European Bank for Reconstruction and Development, Office of the Chief Economist.
    20. Maria Cipollina & Luca De Benedictis & Luca Salvatici & Claudio Vicarelli, 2016. "Policy Measurement And Multilateral Resistance In Gravity Models," Working Papers LuissLab 16130, Dipartimento di Economia e Finanza, LUISS Guido Carli.

    More about this item

    Keywords

    economic governance; gravity model; governance indicators; trade flows;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aes:amfeco:v:23:y:2021:i:56:p:276. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Valentin Dumitru (email available below). General contact details of provider: https://edirc.repec.org/data/aseeero.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.