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A democratic dividend in trade? Evidence from a flexible empirical implementation

Author

Listed:
  • Rodolphe Desbordes
  • Markus Eberhardt
  • Mario Larch

Abstract

We study the causal effect of country-specific democratic regime change on bilateral trade flows, extending standard structural gravity empirics to ‘heterogeneous gravity’ estimated at the country-pair level. Our original difference-in-differences implementation accounts for selection into regime change, multilateral resistance, globalisation effects, and spatial dependence. We initially find average effects of 46% higher exports for countries after thirty years in democracy, but demonstrate that these effects are driven by the democratic dividend for income: the causal chain runs from democracy to economic prosperity to trade, and democracy appears to have a limited ‘direct’ effect on trade flows.K

Suggested Citation

  • Rodolphe Desbordes & Markus Eberhardt & Mario Larch, 2025. "A democratic dividend in trade? Evidence from a flexible empirical implementation," Discussion Papers 2025-02, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:2025-02
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2025/25-02.pdf
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