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Institutions, infrastructure, and trade

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Author Info
Joseph F. Francois () (Department of Economics, Johannes Kepler University Linz, Austria)
Miriam Manchin (University College London)

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Abstract

We work with a panel of bilateral trade flows from 1988 to 2002, exploring the influence of infrastructure, institutional quality, colonial and geographic context, and trade preferences on the pattern of bilateral trade. We are interested in threshold effects, and so emphasize those cases where bilateral country pairs do not actually trade. We depart from the institutions and infrastructure literature in this respect, using selection-based gravity modeling of trade flows. We also depart from this literature by mixing principal components (to condense our institutional and infrastructure measures) with a focus on deviations from expected values for given income cohorts to control for multicollinearity. Infrastructure, and institutional quality, are significant determinants not only of export levels, but also of the likelihood exports will take place at all. Our results support the notion that export performance, and the propensity to take part in the trading system at all, depends on institutional quality and access to well developed transport and communications infrastructure. Indeed, this dependence is far more important, empirically, than variations in tariffs in explaining sample variations in North-South trade. This implies that policy emphasis on developing country market access, instead of support for trade facilitation, may be misplaced.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2007-05.

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Date of creation: Feb 2007
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Handle: RePEc:jku:econwp:2007_05

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Related research
Keywords: exports; trade; institutions; infrastructure; zero-trade; gravity model;

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Find related papers by JEL classification:
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
F10 - International Economics - - Trade - - - General
F15 - International Economics - - Trade - - - Economic Integration

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yue Li & John S. Wilson, 2009. "Trade Facilitation and Expanding the Benefits of Trade: Evidence from Firm Leval Data," Working Papers 7109, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada.. [Downloadable!]
  2. Shepherd , Ben & Wilson, John S., 2008. "Trade facilitation in ASEAN member countries : measuring progress and assessing priorities," Policy Research Working Paper Series 4615, The World Bank. [Downloadable!]
    Other versions:
  3. Mahvash Saeed Qureshi, 2008. "Africa's Oil Abundance and External Competitiveness: Do Institutions Matter?," IMF Working Papers 08/172, International Monetary Fund. [Downloadable!]
  4. Martin, Will & Pham, Cong S., 2008. "Estimating the Gravity Equation when Zero Trade Flows are Frequent," MPRA Paper 9453, University Library of Munich, Germany. [Downloadable!]
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