Working Papers, Department of Economics, Lund University
Why Trading with Dictators May Nevertheless Help the People: On the Interplay between Trade, Political Regimes and Economic Institutions
Abstract: Recent empirical studies confirm a positive relationship
between trade liberalization or trade openness and the quality of domestic
economic institutions. An isolated analysis of trade openness per se,
however, may grossly simplify the mechanisms at work, as the linkage
between open trade and quality of economic institutions is likely to vary
for different political regimes. This study examines the causal
relationship between trade openness and quality of economic institutions
under different political institutions. We find that in the presence of
extractive political institutions, the effect of trade openness on economic
institutions is reduced significantly.
Keywords: trade openness; political institutions; economic institutions; institutional change; (follow links to similar papers)
JEL-Codes: F13; F14; P14; P16; (follow links to similar papers)
36 pages, May 4, 2015, Revised July 23, 2015
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