Institutions, Infrastructure, and Trade

The authors examine the influence of infrastructure, institutional quality, colonial and geographic context, and trade preferences on the pattern of bilateral trade. They are interested in threshold effects, and so emphasize those cases where bilat...

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Bibliographic Details
Main Authors:	Francois, Joseph, Manchin, Miriam
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADMINISTRATIVE BURDENS AIR AIR TRANSPORT APPLIED TARIFF BILATERAL TARIFF BILATERAL TARIFFS BILATERAL TRADE CHANGES IN TRADE COMPARATIVE ADVANTAGE CUSTOMS CUSTOMS UNION DEVELOPMENT AGENCIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DRIVING ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC RESEARCH EXCHANGE RATE EXPANSION OF TRADE EXPECTED VALUES EXPORT GROWTH EXPORT PERFORMANCE EXPORTERS EXPORTING COUNTRY EXPORTS FOREIGN CURRENCY FOREIGN TRADE FREIGHT GDP DEFLATOR GENERAL EQUILIBRIUM MODELING GLOBAL ECONOMY GLOBAL TRADING GRAVITY EQUATION GRAVITY MODEL GRAVITY VARIABLES HUMAN RIGHTS IMPACT OF TRADE IMPERFECT COMPETITION IMPORT DATA IMPORT PROTECTION IMPORTING COUNTRY INCOME INCOME LEVELS INDUSTRIALIZATION INFLATION RATE INTERNATIONAL TRADE LEGAL SYSTEM M1 M2 MARGINAL EFFECTS MARKET ACCESS MIDDLE INCOME COUNTRIES NON-TARIFF BARRIERS OPENNESS PATTERN OF TRADE POLICE POLICY RESEARCH POLITICAL ECONOMY PRODUCT DIFFERENTIATION PROPERTY RIGHTS REAL GDP REGIONALIZATION REGULATIONS ROADS RULE OF LAW SPECIALIZATION SUNK COSTS TARIFF BARRIERS TARIFF DATA TARIFF PREFERENCES TARIFF RATE TARIFF RATES TAX TAX BASE TELECOMMUNICATIONS TOTAL OUTPUT TRADE TRADE BARRIERS TRADE COSTS TRADE DATA TRADE FACILITATION TRADE FLOWS TRADE IN GOODS TRADE LIBERALIZATION TRADE OPENNESS TRADE ORIENTATION TRADE PATTERNS TRADE PERFORMANCE TRADE POLICY TRADE PREFERENCES TRADE PROMOTION TRADE REGIME TRADE REGIMES TRADE RELATIONSHIPS TRADE TAXES TRADE VOLUMES TRADING SYSTEM TRAINS TRANSPARENCY TRANSPORT TRANSPORT COSTS TRANSPORT INFRASTRUCTURE TRANSPORT SYSTEM TRANSPORTATION TRANSPORTATION COSTS TRANSPORTATION SERVICES UNILATERAL TRADE VALUE OF EXPORTS VALUE OF IMPORTS VALUE OF TRADE VOLUME OF TRADE WORLD TRADE WORLD TRADE ORGANIZATION WTO
Online Access:	http://documents.worldbank.org/curated/en/2007/03/7412729/institutions-infrastructure-trade http://hdl.handle.net/10986/7201

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Summary:	The authors examine the influence of infrastructure, institutional quality, colonial and geographic context, and trade preferences on the pattern of bilateral trade. They are interested in threshold effects, and so emphasize those cases where bilateral country pairs do not actually trade. The authors depart from the institutions and infrastructure literature in this respect, using selection-based gravity modeling of trade flows. They also depart from this literature by mixing principal components (to condense the institutional and infrastructure measures) with a focus on deviations in the resulting indexes from expected values for given income cohorts to control for multicollinearity. The authors work with a panel of 284,049 bilateral trade flows from 1988 to 2002. Matching bilateral trade and tariff data and controlling for tariff preferences, level of development, and standard distance measures, they find that infrastructure and institutional quality are significant determinants not only of export levels, but also of the likelihood exports will take place at all. Their results support the notion that export performance, and the propensity to take part in the trading system at all, depends on institutional quality and access to well-developed transport and communications infrastructure. Indeed, this dependence is far more important, empirically, than variations in tariffs in explaining sample variations in North-South trade.

Institutions, Infrastructure, and Trade

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