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The Gravity of Institutions


  • Cindy Duc
  • Emmanuelle Lavallee
  • Jean-Marc Siroen


Do good institutions foster trade? Many trade agreements, and notably those of the European Union, introduce institutional provisions in addition to strictly free-trade measures. In this article, we are interested in the influence of democracy and the fight against corruption on trade. We use a gravity model inspired and adapted from Anderson and van Wincoop (2003) but estimated with a Poisson Pseudo-Maximum Likelihood (PPML) method, which circumvents the heteroskedasticity bias encountered with the usual Ordinary Least Square (OLS) estimators. We analyze the effects of institutional similarities on bilateral trade, before regressing the country fixed-effects to test for the consequences of democracy and the fight against corruption on trade for all countries. Our results show that democratic countries are generally more open, but that two democratic nations do not necessarily trade more between each other. The reverse is true for corruption.

Suggested Citation

  • Cindy Duc & Emmanuelle Lavallee & Jean-Marc Siroen, 2008. "The Gravity of Institutions," Economie Internationale, CEPII research center, issue 113, pages 95-113.
  • Handle: RePEc:cii:cepiei:2008-1td

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    Cited by:

    1. Ayçıl Yücer & Jean-Marc Siroën, 2017. "Trade Performance of Export Processing Zones," The World Economy, Wiley Blackwell, vol. 40(5), pages 1012-1038, May.
    2. Ayaz Zeynalov, 2017. "The gravity of institutions in a resource-rich country: the case of Azerbaijan," International Economics and Economic Policy, Springer, vol. 14(2), pages 239-261, April.
    3. Jean-Marc Siroën & Ayçil Yücer, 2014. "Trade Performance of Free Trade Zones," Working Papers DT/2014/09, DIAL (Développement, Institutions et Mondialisation).
    4. Laurent Didier, 2019. "Soft power and exporters behavior in international trade," Economics Bulletin, AccessEcon, vol. 39(4), pages 2595-2614.
    5. Zeynalov, Ayaz, 2014. "The Gravity of Institutions in Resource-Rich Country," MPRA Paper 60943, University Library of Munich, Germany.
    6. repec:dau:papers:123456789/10626 is not listed on IDEAS

    More about this item


    International trade; gravity models; governance; democracy; corruption;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies


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