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Domestic formal and informal institutions: their substitutability and comparative advantage

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  • Se Mi Park

    (University of Maryland, Baltimore County)

Abstract

This paper empirically examines how country-specific formal and informal institutions affect export patterns. The index for formal institutional quality evaluates electoral rules, judicial independence, and other constraints on executives. The index for informal institutional quality comprises degrees of trust, control, and obedience. Using the revealed comparative advantage index, I find that countries with high-quality formal and informal institutions tend to have institutional comparative advantage. Results also suggest that formal and informal institutions substitute for one another in generating institutional quality. I find robust results even when controlling for an important potential source of reverse causality.

Suggested Citation

  • Se Mi Park, 2023. "Domestic formal and informal institutions: their substitutability and comparative advantage," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(4), pages 853-886, November.
    • Handle: RePEc:spr:weltar:v:159:y:2023:i:4:d:10.1007_s10290-022-00483-0
    DOI: 10.1007/s10290-022-00483-0
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    More about this item

    Keywords

    Formal institutions; Informal institutions; Institutional comparative advantage;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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