Will Institutional Reform Enhance Bilateral Trade Flows? Analyses from Different Reform Aspects

36 Pages Posted: 2 Oct 2010

See all articles by Apanard Penny Prabha

Apanard Penny Prabha

University of Illinois at Springfield

Eric M.P. Chiu

National Chung Hsing University

Date Written: September 30, 2010

Abstract

This paper examines the effect of various types of institutional reforms in enhancing bilateral trade flows. We examine three types of institutional reforms' democratic political system, legal, and administrative reforms, and distinguish an initial effect from a permanent effect on bilateral trade for each reform type. Using a panel of 62 countries over 1980-2008, we find that all three types of reforms are important in enhancing bilateral trade flows, but their positive effects are only observed when the reforms are permanent. During the first year of reforms trade flows may decline due to the uncertainty of the success of those reforms. Our study concludes that permanent improvement in domestic institutions should be an important way for policy makers to pursue in promoting trade, in addition to other existing options such as forming regional trade arrangements.

Keywords: Institutional reform, bilateral trade flows, gravity model, panel-data fixed-effects models

JEL Classification: F10, F41, H10

Suggested Citation

Prabha, Apanard Penny and Chiu, Eric M.P., Will Institutional Reform Enhance Bilateral Trade Flows? Analyses from Different Reform Aspects (September 30, 2010). Available at SSRN: https://ssrn.com/abstract=1685656 or http://dx.doi.org/10.2139/ssrn.1685656

Apanard Penny Prabha

University of Illinois at Springfield ( email )

Springfield, IL 62703
United States

Eric M.P. Chiu (Contact Author)

National Chung Hsing University ( email )

402, No. 250 Kuo Kuang Road, Taiwan
Taichung, Taiwan
China

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
65
Abstract Views
604
Rank
618,039
PlumX Metrics