Institutions, Infrastructure, and Trade

By Joseph Francois, M. Manchin. 2007

562 citations recorded by the source corpus.

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.

Subfields: Development, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/308bfa9016fd78d4a36bf228c2e2fe12e9abbb51

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Citations in the corpus

Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure (2010, methodology): “Third, we follow Freund and Rocha (2010) and restrict exports to new products to deal with reverse causality of exports to trade facilitation, as trade in new goods cannot affect investment in ‘hard infrastructure’ or institutional reform.”
Estimating the gravity model when zero trade flows are frequent and economically determined (2015, background): “(see, for example, Francois and Manchin (2007) and Lederman and Ozden (2007)).”
Aid-for-trade facilitation (2009, unknown): “6 Gravity models incorporating border and behind-the-border trade facilitation measures, including Wilson et al. (2003, 2005), Engman (2005), Francois and Manchin (2007).”
Does aid for trade enhance export performance? Investigating on the infrastructure channel (2012, methodology): “The infrastructure index used in the rest of the paper is the first principal component obtained from our infrastructures variables by Principal Component Analysis (PCA) (François and Manchin 2007, Calderon and Servén 2004) 8 .”
Trade facilitation in ASEAN member countries: Measuring progress and assessing priorities (2008, background): “, Walkenhorst and Yasui (2003), Francois et al. (2005), and Decreux and Fontagné (2006).”