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The effect of trade and political institutions on economic institutions

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  • Usman Khalid

Abstract

This study examines the relationship between trade and the quality of economic institutions under different political institutions. It uses panel data of 138 countries from 1984 to 2010 and employs instrumental variables and identification through heteroscedasticity to mitigate the problem of endogeneity. The findings suggest that the effect of trade on economic institutions reduces significantly in the presence of extractive political institutions. The findings indicate that ‘trade’ is not a sufficient tool for improving economic institutions; rather, trade policies need to be embedded in distinct political institutions to trigger the substantive improvement of economic institutions.

Suggested Citation

  • Usman Khalid, 2017. "The effect of trade and political institutions on economic institutions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(1), pages 89-110, January.
    • Handle: RePEc:taf:jitecd:v:26:y:2017:i:1:p:89-110
    DOI: 10.1080/09638199.2016.1206142
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    References listed on IDEAS

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    1. Gert-Jan M. Linders & Henri L.F. de Groot & Piet Rietveld, 2005. "Institutional Determinants of Bilateral Trade: An Analysis according to Product Type," Tinbergen Institute Discussion Papers 05-023/3, Tinbergen Institute.
    2. Mr. Saleh M. Nsouli & Mr. Ruben V Atoyan & Mr. Alex Mourmouras, 2004. "Institutions, Program Implementation, and Macroeconomic Performance," IMF Working Papers 2004/184, International Monetary Fund.
    3. 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.
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    1. Usman Khalid & Luke Okafor & Muhammad Shahbaz, 2022. "Economic reform and political stagnation: The inconsistent patterns of institutional change," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(4), pages 813-844, October.
    2. Khalid, Usman & Shafiullah, Muhammad, 2021. "Financial development and governance: A panel data analysis incorporating cross-sectional dependence," Economic Systems, Elsevier, vol. 45(2).
    3. Gandjon Fankem, Gislain Stéphane & Feyom, Cédric, 2024. "Does trade openness improve or worsen public governance in sub-Saharan Africa?," International Economics, Elsevier, vol. 178(C).
    4. Daniel J. Lewis, 2022. "Robust Inference in Models Identified via Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 510-524, May.
    5. Luke Emeka Okafor & Usman Khalid, 2021. "Regaining international tourism attractiveness after an armed conflict: the role of security spending," Current Issues in Tourism, Taylor & Francis Journals, vol. 24(3), pages 385-402, February.
    6. Moon Jung Choi & Kee Hoon Chung, 2022. "Trade patterns and institutional change in East Asia," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 30(3), pages 567-595, July.
    7. Muhammad Shafiullah & Usman Khalid & Luke Emeka Okafor, 2023. "Do birds of a feather flock together? Analyzing environmental performance and tourist behavior using a gravity approach," Tourism Economics, , vol. 29(5), pages 1139-1163, August.
    8. Usman Khalid & Luke Emeka Okafor & Nusrate Aziz, 2020. "Armed conflict, military expenditure and international tourism," Tourism Economics, , vol. 26(4), pages 555-577, June.

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