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Trade Liberalization And Institutional Development

  • Sambit Bhattacharyya

Recent research shows that the majority of cross-national variation in institutions is related to history. The within variation however is somewhat less explored. We find that the within variation in economic institutions can be explained by trade liberalization. This relationship is robust with various indicators of liberalization, in different sub-samples, and to the inclusion of additional covariates. Short-run trade liberalization appears to be more important than long-run trade liberalization. This may be indicative of a short-term trade liberalization induced shift in the long-run institutional equilibrium. We also find that the country fixed effects are highly correlated with settler mortality and other historical variables. This is consistent with recent theoretical developments in the political economy literature and with the ‘critical juncture’ view of history.

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File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2008/wp_econ_2008_13.pdf
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Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2008-13.

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Length: 51 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:pas:papers:2008-13
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