Does Trade Pattern Enhance Institutional Quality? Comparison across Regions

Abstract

We empirically investigate how trade pattern – institutionally intensive export (IIX) – affects institutional quality, a source of comparative advantage for IIX. Using panel data for147 countries from 2002 to 2016, we examine the effect of IIX on institutional quality across regions. Our estimation results of fixed effects and dynamic panel models show significant regional heterogeneity. Most noticeably, the effect is negative and significant only for East Asia robustly in all dynamic models. Our result suggests that IIX may not unambiguously improve institutional quality across the board, and the effect needs to be considered differently across regions.