The role of institutional quality in the international trade of a Latin American country: evidence from Colombian export performance (original) (raw)
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The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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The literature that addresses the role of institutions in bilateral trade is extensive. However, research that link institutional quality to specific products and their different levels of value addition is lacking. In this study, we look into institutional quality, based on three indicators from the World Bank, and its indicator-specific effects on bilateral coconut trade. In particular, we study coconut products with varying degrees of value-addition. We utilize structural gravity models to measure how institutions affect the trade performance of the top 26 coconut producing countries to the top 15 importing economies over the years 1996-2016. Our results show that increased voice and accountability reduce bilateral trade of both highvalue and low-value coconut products while government effectiveness increases trade flows of high value products. Better control of corruption decreases trade of coconut oil. Furthermore, similarities in the voice and accountability and government eff...
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Since institutional quality can either create or destroy incentives for individuals to engage in trade, it has become a source of worry to policymakers, as it can limit both intra- and extra-regional trade. Based on this, we empirically analyzed the extent to which national institutional quality affects bilateral trade flows in ECOWAS based on a gravity model for the period from 2000 to 2018. Specifically, the study employs the negative binomial pseudo-maximum likelihood estimator (NBPML). The results reveal that institutional variables with both aggregated and disaggregated measures of the quality of institutions have a significant and positive impact on trade flows in ECOWAS and on its sub-samples, WAEMU and WAMZ. The results further indicate that for both importing and exporting countries, reduced corruption, effective rule of law, and effective government coincide with more trade among member countries. The degree of regional integration is an important determinant of intra-ECOW...
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