A Re-examination of the Relation Between Democracy and International Trade
by Christopher Balding
ARTICLE | Journal of International Trade & Economic Development | Vol.20,2011
Abstract
Scholars and policy makers believe that democracy will bring prosperity through integration into the global economy via increased international trade. Existing research is plagued by methodological problems that obscure the empirics and avoid the theoretical problem of why democracies may or may not trade more. In this paper, I seek to correct these shortcomings. I test two theories as to why democracies might trade more. First, political freedom may be correlated with economic freedom, thus prompting higher levels of economic activity, thereby driving states to trade more. Second, democracy implies higher quality governance either through institutions or policy making procedures. To test the impact of democracy on trade and the potential transmission mechanisms, I utilize a bilateral gravity trade model covering approximately 150 countries from 1950 to 1999, with fixed effects for time, importers, and exporters. I find the theory that democracy, and many of its components, promotes international trade unconvincing. The coefficients are the theoretically correct sign; however, many are statistically or economically insignificant and fragile to changes in modeling or data. Economic freedom does not have the expected impact on international trade levels, but quality of governance variables have broad economic and statistical significance.
Popular Articles
-
International Student Profile: Kevin Kurnia
Oct 12 2017
-
Start your application to join PHBS!
Sep 18 2018
-
PHBS Opening a Campus in UK: Se...
Feb 22 2017
Latest News
-
Peking University HSBC Business S...
Time:Dec 20 2019
-
Studious and Aspiring | Dean Hai...
Time:Dec 20 2019
-
PHBS Holds the Second PHBS Works...
Time:Dec 19 2019
Campus Events