Application of Gravity Model to the Analysis of Cross-Country Differences in the Levels of Institutional Development
This paper presents an econometric model intended to explain fundamental cross-country differences in the quality of national economic institutions by using the set of economic, geographical, cultural and historical factors. Our key research hypothesis claims that bilateral trade may be working as a critical channel for institutional evolution, including through import of institutions by less developed countries from their more institutionally advanced trade partners. We follow logic of the modified gravity model of foreign trade to justify the model specification. Econometric analysis was conducted on the performance data of more than 100 countries in 1996-2006. Our results support the hypothesis that many factors that drive international institutional differences are identical to those that define intensity of trade interactions in the traditional gravity model. As a result, global institutional progress has been showing particular historic and geographical patterns. We come to the conclusion that, after controlling for differences in the levels of per capita income, institutional cross-country differences are significantly influenced by countries’ location and geographic neighborhood, and with time countries tend to form homogeneous geographic clusters by the level of institutional development.
|Date of creation:||27 Feb 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
- Hausmann, Ricardo & Pritchett, Lant & Rodrik, Dani, 2004.
CEPR Discussion Papers
4538, C.E.P.R. Discussion Papers.
- Ricardo Hausmann & Lant Pritchett & Dani Rodrik, 2004. "Growth Accelerations," NBER Working Papers 10566, National Bureau of Economic Research, Inc.
- Hausmann, Ricardo & Pritchett, Lant & Rodrik, Dani, 2004. "Growth Accelerations," Working Paper Series rwp04-030, Harvard University, John F. Kennedy School of Government.
- Thierry Mayer & Soledad Zignago, 2011.
"Notes on CEPII’s distances measures: The GeoDist database,"
2011-25, CEPII research center.
- Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
- Jeffrey Wurgler, 1999.
"Financial Markets And The Allocation Of Capital,"
Yale School of Management Working Papers
ysm123, Yale School of Management, revised 01 Mar 2001.
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
- Robert J. Barro, 1996.
"Determinants of Economic Growth: A Cross-Country Empirical Study,"
NBER Working Papers
5698, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, June.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
NBER Working Papers
7771, National Bureau of Economic Research, Inc.
- 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.
- John F. Helliwell & Robert D. Putnam, 1995. "Economic Growth and Social Capital in Italy," Eastern Economic Journal, Eastern Economic Association, vol. 21(3), pages 295-307, Summer.
- Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:55427. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.