IDEAS home Printed from https://ideas.repec.org/p/ekd/008007/8750.html

Democracy and Trade—Evidence along the Distribution of Trading Activity

Author

Listed:
  • Astrid Krenz
  • Ana Abeliansky

Abstract

This paper analyzes the impact of democracy on trade along the distribution of countries' trading activity. We find a stronger relationship between democracy and trade at the lower quantiles of the trading activity, especially for the importing activity. Our results imply that the impact of democratization on trade is more important at a lower level of trading activity. Democratization's marginal benefit decreases over the distribution of the trading activity. We specially focus on a widely neglected issue in the literature: economies with higher trading activity are not necessarily the most democratic countries in the world. We find particular differences in the case of China, Malaysia, Mexico and Russia. Quantile regressions offer a powerful tool to detect these interdependencies. Using a conditional mean estimation methodology only leads to the wrong conclusion that the relationship between democracy and trade remains the same across the distribution of the trading activity and across different countries. See above See above

Suggested Citation

  • Astrid Krenz & Ana Abeliansky, 2015. "Democracy and Trade—Evidence along the Distribution of Trading Activity," EcoMod2015 8750, EcoMod.
    • Handle: RePEc:ekd:008007:8750
    as

    Download full text from publisher

    File URL: http://ecomod.net/system/files/Democracy%20and%20Trade_version2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    2. Powell, David, 2013. "A New Framework for Estimation of Quantile Treatment Effects: Nonseparable Disturbance in the Presence of Covariates," Working Papers 824-1, RAND Corporation.
    3. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    4. Toke S. Aidt & Martin Gassebner, 2010. "Do Autocratic States Trade Less?," The World Bank Economic Review, World Bank, vol. 24(1), pages 38-76, January.
    5. Paola Giuliano & Prachi Mishra & Antonio Spilimbergo, 2013. "Democracy and Reforms: Evidence from a New Dataset," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 179-204, October.
    6. Krenz, Astrid, 2013. "Political institutions and trade-evidence for the long-run relationship and causality," University of Göttingen Working Papers in Economics 182, University of Goettingen, Department of Economics.
    7. Francois, Joseph & Manchin, Miriam, 2013. "Institutions, Infrastructure, and Trade," World Development, Elsevier, vol. 46(C), pages 165-175.
    8. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731.
    9. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    10. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    11. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422.
    12. Miaojie YU, 2005. "Trade Globalization and Political Liberalization: A Gravity Approach," International Trade 0511005, University Library of Munich, Germany.
    13. Barry Eichengreen & David Leblang, 2008. "Democracy And Globalization," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 289-334, November.
    14. Edward D. Mansfield & Helen V. Milner & B. Peter Rosendorff, 2015. "Free to Trade: Democracies, Autocracies, and International Trade," World Scientific Book Chapters, in: Edward D Mansfield (ed.), THE POLITICAL ECONOMY OF INTERNATIONAL TRADE, chapter 7, pages 127-143, World Scientific Publishing Co. Pte. Ltd..
    15. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    16. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 791-819.
    17. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions?," Open Access publications 10197/7587, School of Economics, University College Dublin.
    18. Pushan Dutt & Daniel Traca, 2010. "Corruption and Bilateral Trade Flows: Extortion or Evasion?," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 843-860, November.
    19. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    20. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    21. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
    22. repec:cup:apsrev:v:53:y:1959:i:01:p:69-105_00 is not listed on IDEAS
    23. 강병수 & 김병재 & 신종칠 & Myung Soo Kang & Byoung Jai Kim & Jong Chil Shin, 2007. "Measuring Consumer-Brand Relationship Quality," Journal of Global Scholars of Marketing Science, Taylor & Francis Journals, vol. 17(2), pages 111-131, June.
    24. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, September.
    25. David Powell, 2013. "A New Framework for Estimation of Quantile Treatment Effects Nonseparable Disturbance in the Presence of Covariates," Working Papers WR-824-1, RAND Corporation.
    26. David Powell, 2010. "Unconditional Quantile Treatment Effects in the Presence of Covariates," Working Papers WR-816, RAND Corporation.
    27. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, vol. 97(3), pages 916-943, June.
    28. Daniel Berger & William Easterly & Nathan Nunn & Shanker Satyanath, 2013. "Commercial Imperialism? Political Influence and Trade during the Cold War," American Economic Review, American Economic Association, vol. 103(2), pages 863-896, April.
    29. David Powell, 2010. "Unconditional Quantile Treatment Effects in the Presence of Covariates," Working Papers 816, RAND Corporation.
    30. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions? An Empirical Assessment," Review of Economics and Institutions, Università di Perugia, vol. 2(2).
    31. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    32. Milner, Helen V. & Kubota, Keiko, 2005. "Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries," International Organization, Cambridge University Press, vol. 59(1), pages 107-143, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abeliansky, Ana & Krenz, Astrid, 2015. "Democracy and international trade: Differential effects from a panel quantile regression framework," University of Göttingen Working Papers in Economics 243, University of Goettingen, Department of Economics.
    2. Krenz, Astrid, 2016. "Do political institutions influence international trade? Measurement of institutions and the Long-Run effects," University of Göttingen Working Papers in Economics 276, University of Goettingen, Department of Economics.
    3. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions? An Empirical Assessment," Review of Economics and Institutions, Università di Perugia, vol. 2(2).
    4. Gani, Azmat & Scrimgeour, Frank, 2016. "New Zealand's trade with Asia and the role of good governance," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 36-53.
    5. Marcella Nicolini & Alessia Paccagnini, 2011. "Does Trade Foster Institutions?," Open Access publications 10197/7587, School of Economics, University College Dublin.
    6. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    7. Saad, Ayhab F., 2021. "Institutional change in the global economy: How trade reform can be detrimental to welfare," Economic Modelling, Elsevier, vol. 95(C), pages 97-110.
    8. Tchouassi Tchouassi, 2013. "Are Trade Liberalization and Democracy Driving Development in Central Africa Region? Empirical Lessons," Journal of Social and Development Sciences, AMH International, vol. 4(3), pages 131-140.
    9. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
    10. Jorge Braga Macedo & Joaquim Oliveira Martins & João Tovar Jalles, 2021. "Globalization, Freedoms and Economic convergence: an empirical exploration of a trivariate relationship using a large panel," International Economics and Economic Policy, Springer, vol. 18(3), pages 605-629, July.
    11. Azmat Gani, 2018. "Contract Enforcement and Trade," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 107-119, March.
    12. Colagrossi, Marco & Rossignoli, Domenico & Maggioni, Mario A., 2020. "Does democracy cause growth? A meta-analysis (of 2000 regressions)," European Journal of Political Economy, Elsevier, vol. 61(C).
    13. Das, Joy & Tanger, Shaun & Fannin, J. Matthew & Kennedy, P. Lynn, 2020. "Institutional Determinant of Market Concentration and Trade in a General Equilibrium Setup," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304458, Agricultural and Applied Economics Association.
    14. Eugene Kouassi & Sandotin Coulibaly & Oluyele Akinkugbe & Mbodja Mougoué, 2021. "The democracy income‐growth nexus in the southern African development community revisited," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1835-1854, April.
    15. Yu, Miaojie, 2010. "Trade, democracy, and the gravity equation," Journal of Development Economics, Elsevier, vol. 91(2), pages 289-300, March.
    16. Shadrack Muthami Mwatu, 2022. "Institutions and export performance: firm level evidence from Kenya," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(4), pages 487-506, December.
    17. Wenni Lei & Yuwei Luo, 2022. "Institutions Rule in Export Diversity," Sustainability, MDPI, vol. 14(18), pages 1-14, September.
    18. Natkhov, T. & Polishchuk, L., 2017. "Political Economy of Institutions and Development: The Importance of Being Inclusive. Reflection on "Why Nations Fail" by D. Acemoglu and J. Robinson. Part I. Institutions and Economic Development. Institutional Choice," Journal of the New Economic Association, New Economic Association, vol. 34(2), pages 12-38.
    19. Yue, Jiahua & Zhou, Shangsi, 2018. "Democracy’s comparative advantage: Evidence from aggregated trade data, 1962–2010," World Development, Elsevier, vol. 111(C), pages 27-40.
    20. Tabellini, Marco & Magistretti, Giacomo, 2020. "Economic Integration and Democracy: An Empirical Investigation," CEPR Discussion Papers 14336, Centre for Economic Policy Research.

    More about this item

    Keywords

    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ekd:008007:8750. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Theresa Leary (email available below). General contact details of provider: https://edirc.repec.org/data/ecomoea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.