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How institutions affect export quality

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  • Faruq, Hasan A.

Abstract

We examine the relationship between a country's institutional environment and the quality of its exports. Institutional factors such as widespread corruption, inefficient bureaucracy, and high risk of expropriation of private property by government can create uncertainty among producers and discourage them from investing and innovating over the long term. This can limit the ability of producers to improve the quality of their exports in the future. We find some evidence that a better institutional environment (i.e. lower corruption, more efficient bureaucracy and more secure property rights) is associated with better export quality. After accounting for potential endogeneity between institutional and economic variables, we conclude that better institutions lead to improvements in export quality. Among the institutional factors considered in this article, corruption appears to be most robustly associated with export quality. These results have important implications for policymakers.

Suggested Citation

  • Faruq, Hasan A., 2011. "How institutions affect export quality," Economic Systems, Elsevier, vol. 35(4), pages 586-606.
  • Handle: RePEc:eee:ecosys:v:35:y:2011:i:4:p:586-606
    DOI: 10.1016/j.ecosys.2011.05.001
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    References listed on IDEAS

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    Cited by:

    1. Gnangnon, Sèna Kimm & Roberts, Michael, 2015. "Aid for trade, foreign direct investment and export upgrading in recipient countries," WTO Staff Working Papers ERSD-2015-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. repec:wsi:jicepx:v:08:y:2017:i:02:n:s1793993317500107 is not listed on IDEAS

    More about this item

    Keywords

    Product quality; Trade; Property rights; Corruption; Bureaucratic quality;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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