The Effect of International Trade on Rule of Law
27 Pages Posted: 28 Aug 2013 Last revised: 4 Nov 2016
Date Written: March 26, 2013
Abstract
In this paper, we look at the relationship between international trade and the rule of law, using the World Justice Project Rule of Law Index, which include index figures on human rights, limits on government powers, transparency and regulatory efficiency. Based on regression analyses using the rule of law index figures and international trade figures (merchandise trade, service trade, exports and imports as percentage of GDP) international trade and basic human rights seem to have little relationship; but trade has a close positive relationship with strong order and security. Somewhat surprisingly, regulatory transparency and effective implementation seems to have little or no effect on international trade and vice versa. International trade shows a clear positive relationship with the country’s criminal justice system, but the relationship with the civil justice system is not as clear as such. For regulatory implementation and civil justice, services trade positively affect these institutions, but these institutions in turn affect exports more strongly than services trade. Finally, the effect of trade on rule of law is stronger on a medium to long term (10-20 year) time horizon.
Keywords: Rule of Law, International Trade, Regulatory Reform, Transparency, Institutions
JEL Classification: F19, K49, O43
Suggested Citation: Suggested Citation
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