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A Re-examination of the Relation between Democracy and International Trade The Case of Africa

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  • Balding, Christopher

Abstract

Scholars and policy makers believe that democracy will bring prosperity through integration into the global economy via increased international trade. This study tests two theories as to why democracies might trade more. First, political freedom may be correlated with economic freedom, thus prompting higher levels of economic activity, thereby driving states to trade more. Second, democracy implies higher quality governance either through institutions or policy-making procedures. I utilize a bilateral gravity trade model covering approximately 150 countries from 1950 to 1999, with fixed effects for time, importers and exporters. I find the theory that democracy, and many of its components, promotes international trade unconvincing. Economic freedom does not have the expected impact on international trade levels, but quality of governance variables have broad economic and statistical significance.

Suggested Citation

  • Balding, Christopher, 2011. "A Re-examination of the Relation between Democracy and International Trade The Case of Africa," WIDER Working Paper Series 059, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2011-59
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    Cited by:

    1. Christos Kollias & Suzanna-Maria Paleologou, 2017. "The Globalization and Peace Nexus: Findings Using Two Composite Indices," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 871-885, April.
    2. Krenz, Astrid & Abeliansky, Ana, 2016. "Democracy and International Trade: Differential Effects from a Panel Quantile Regression Framework," Annual Conference 2016 (Augsburg): Demographic Change 145788, Verein für Socialpolitik / German Economic Association.
    3. Abeliansky, Ana & Krenz, Astrid, 2015. "Democracy and international trade: Differential effects from a panel quantile regression framework," Center for European, Governance and Economic Development Research Discussion Papers 243, University of Goettingen, Department of Economics.
    4. Aditya Rangga Yogatama & Fithra Faisal Hastiadi, 2015. "The Role of Democracy and Governance in the Enhancement of Indonesian Exports to the Organization of the Islamic Cooperation (OIC) Countries," Working Papers in Economics and Business 201504, Faculty of Economics and Business, University of Indonesia, revised Jul 2015.

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    Keywords

    trade; democracy; governance; Africa; gravity model;

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