Hostname: page-component-857557d7f7-bkbbk Total loading time: 0 Render date: 2025-11-25T07:52:35.321Z Has data issue: false hasContentIssue false
  • English
  • Français

The Effects of Political Institutions on the Extensive and Intensive Margins of Trade

Published online by Cambridge University Press:  25 September 2019

In Song Kim ,
John Londregan  and
Marc Ratkovic
Get access

Abstract

We present a model of political networks that integrates both the choice of trade partners (the extensive margin) and trade volumes (the intensive margin). Our model predicts that regimes secure in their survival, including democracies as well as some consolidated authoritarian regimes, will trade more on the extensive margin than vulnerable autocracies, which will block trade in products that would expand interpersonal contact among their citizens. We apply a two-stage Bayesian LASSO estimator to detailed measures of institutional features and highly disaggregated product-level trade data encompassing 131 countries over a half century. Consistent with our model, we find that (a) political institutions matter for the extensive margin of trade but not for the intensive margin and (b) the effects of political institutions on the extensive margin of trade vary across products, falling most heavily on those goods that involve extensive interpersonal contact.

Keywords

Extensive and intensive margins of tradepolitical networksdifferentiated productspolitydemocracyinternational tradevariable selectionmachine learningLASSOzero trade

Information

Type
Research Article
Information
International Organization , Volume 73 , Issue 4 , Fall 2019 , pp. 755 - 792
Copyright
Copyright © The IO Foundation 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Amemiya, Takeshi. 1984. Tobit Models: A Survey. Journal of Econometrics 24 (1–2):3–61.Google Scholar
Anderson, E. James. 1979. A Theoretical Foundation for the Gravity Equation. The American Economic Review 69 (1):106–16.Google Scholar
Anderson, James E., and van Wincoop, Eric. 2003. Gravity with Gravitas: A Solution to the Border Puzzle. The American Economic Review 93 (1):170–92.Google Scholar
Antràs, Pol. 2015. Global Production: Firms, Contracts, and Trade Structure. Princeton University Press.Google Scholar
Antràs, Pol, Chor, Davin, Fally, Thibault, and Hillberry, Russell. 2012. Measuring the Upstreamness of Production and Trade Flows. The American Economic Review 102 (3):412–16.Google Scholar
Arkolakis, Costas, Costinot, Arnaud, and Rodríguez-Clare, Andrés. 2012. New Trade Models, Same Old Gains? The American Economic Review 102 (1):94–130.Google Scholar
Barari, Soubhik Barari, Kim, In Song, and Wong, Weihuang. 2018. Trade Liberalization and Regime Type: Evidence from a New Tariff-line Dataset. Working Paper. Available at < http://web.mit.edu/insong/www/pdf/poltrade.pdf > .+.>Google Scholar
Blalock, Garrick, and Gertler, Paul J.. 2004. Learning from Exporting Revisited in a Less Developed Setting. Journal of Development Economics 75 (2):397–416.Google Scholar
Bliss, Harry, and Russett, Bruce M.. 1998. Democratic Trading Partners: The Liberal Connection, 1962–1989. Journal of Politics 60 (4):1126–47.Google Scholar
Bollen, Kenneth. 1993. Liberal Democracy: Validity and Method Factors in Cross-National Measures. American Journal of Political Science 37 (4):1207–30.Google Scholar
Bown, Chad P. 2011. Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009. The World Economy 34 (12):1955–98.Google Scholar
Broda, Christian, and Weinstein, David E.. 2006. Globalization and the Gains from Variety. The Quarterly Journal of Economics 121 (2):541–85.Google Scholar
Bueno De Mesquita, Bruce, and Downs, George W.. 2005. Development and Democracy. Foreign Affairs 84 (5):77–86.Google Scholar
Chaney, Thomas. 2008. Distorted Gravity: The Intensive and Extensive Margins. American Economic Review 98 (4):1707–21.Google Scholar
Chaney, Thomas. 2014. The Network Structure of International Trade. American Economic Review 104 (11):3600–34.Google Scholar
Coppedge, Michael, and Reinicke, Wolfgang. 1991. Measuring Polyarchy. In On Measuring Democracy: Its Consequences and Comcommitants, edited by Inkeles, Alex, 47–68. Transaction.Google Scholar
Dutt, Pushan, Mihov, Ilian, and Van Zandt, Timothy. 2013. The Effect of WTO on the Extensive and the Intensive Margins of Trade. Journal of International Economics 91 (2):204–19.Google Scholar
Eaton, Jonathan, Kortum, Samuel, and Kramarz, Francis. 2011. An Anatomy of International Trade: Evidence from French Firms. Econometrica 79 (5):1453–98.Google Scholar
Egorov, Georgy, Guriev, Sergei, and Sonin, Konstantin. 2009. Why Resource-Poor Dictators Allow Freer Media: A Theory and Evidence from Panel Data. American Political Science Review 103 (4):645–68.Google Scholar
Eisen, Michael B., Spellman, Paul T., Brown, Patrick O., and Botstein, David. 1998. Cluster Analysis and Display of Genome-wide Expression Patterns. Procedings of the National Academy of Sciences 95 (25):14,863–68.Google Scholar
Erickson, Kathleen. 1981. Secret Societies and Social Structure. Social Forces 60 (1):188–210.Google Scholar
Frankel, Jeffrey A., Stein, Ernesto, and Wei, Shang-Jin. 1997. Regional Trading Blocs in the World Economic System. Peterson Institute.Google Scholar
Freedom, House. 2014. Freedom in the World: 2014. Online document. Available at < https://freedomhouse.org/sites/default/files/Freedom%20in%20the%20World%202014%20Booklet.pdf > .+.>Google Scholar
Frieden, Jeffry A., and Rogowski, Ronald. 1996. The Impact of the International Economy on National Policies: An Analytical Overview. In Internationalization and Domestic Politics, edited by Keohane, Robert O. and Milner, Helen V., 25–47. Cambridge University Press.Google Scholar
Garmendia, Aitor, Llano, Carlos, Minondo, Asier, and Requena, Francisco. 2012. Networks and the Disappearance of the Intranational Home Bias. Economics Letters 116 (2):178–82.Google Scholar
Gelman, Andrew, Carlin, John B., Stern, Hal S., and Rubin, Donald B.. 2014. Bayesian Data Analysis. Chapman and Hall/CRC.Google Scholar
Gibler, Douglas M. 2013. Correlates of War Formal Interstate Alliance Dataset, 1816-2012. CQ Press.Google Scholar
Goldstein, Judith L., Rivers, Douglas, and Tomz, Michael. 2007. Institutions in International Relations: Understanding the Effects of the GATT and the WTO on World Trade. International Organization 61 (1):37–67.Google Scholar
Gowa, Joanne. 1989. Bipolarity, Multipolarity, and Free Trade. American Political Science Review 83 (4):1245–56.Google Scholar
Greif, Avner. 1989. Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders. The Journal of Economic History 49 (4):857–82.Google Scholar
Greif, Avner, Milgrom, Paul, and Weingast, Barry R.. 1994. Coordination, Commitment, and Enforcement: The Case of the Merchant Guild. Journal of Political Economy 102 (4):745–76.Google Scholar
Hadar, Josef, and Russell, William R.. 1969. Rules for Ordering Uncertain Prospects. The American Economic Review 59 (1):25–34.Google Scholar
Hanoch, Giora, and Levy, Haim. 1969. The Efficiency Analysis of Choices Involving Risk. The Review of Economic Studies 36 (3):335–46.Google Scholar
Heckman, James J. 1979. Sample Selection Bias as a Specification Error. Econometrica 47 (1):153–61.Google Scholar
Helpman, Elhanan, Melitz, Marc, and Rubinstein, Yona. 2008. Estimating Trade Flows: Trading Partners and Trading Volumes. The Quarterly Journal of Economics 123 (2):441–87.Google Scholar
Henisz, Witold J. 2000. The Institutional Environment for Economic Growth. Economics and Politics 12 (1):1–31.Google Scholar
Henisz, Witold J., and Mansfield, Edward D.. 2006. Votes and Vetoes: The Political Determinants of Commercial Openness. International Studies Quarterly 50 (1):189–212.Google Scholar
Herfindahl, Orris Clemens. 1950. Concentration in the Steel Industry. PhD Dissertation, Columbia University.Google Scholar
Hirschleifer, Jack. 1989. Conflict and Rent-seeking Success Functions: Ratio vs. Difference Models of Relative Success. Public Choice 63 (2):101–12.Google Scholar
Hiscox, Michael J. 2002. Commerce, Coalitions, and Factor Mobility: Evidence from Congressional Votes on Trade Legislation. The American Political Science Review 96 (3):593–608.Google Scholar
Hollyer, James R., Rosendorff, Peter B., and Vreeland, James Raymond. 2011. Democracy and Transparency. Journal of Politics 73 (4):1191–205.Google Scholar
Jackson, Matthew O. 2010. Social and Economic Networks. Princeton University Press.Google Scholar
Jeffreys, Harold. 1998. The Theory of Probability. 3rd ed. Oxford University Press.Google Scholar
Kapelko, Natalia, and Volchkova, Natalya. 2013. Export Costs of Visa Restrictions: Evidence from Russia. SSRN. Available at < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2243136 > .+.>Google Scholar
Kass, Robert E., and Raftery, Adrian E.. 1995. Bayes Factors. Journal of the American Statistical Association 90 (430):773–95.Google Scholar
Kim, In Song, Liao, Steven, and Imai, Kosuke. Forthcoming. Measuring Trade Profile with Granular Product-level Trade Data. American Journal of Political Science.Google Scholar
King, Gary, Pan, Jennifer, and Roberts, Margaret. 2013. How Censorship in China Allows Government Criticism but Silences Collective Expression. American Political Science Review 107 (2):1–18.Google Scholar
Kono, Daniel Y. 2006. Optimal Obfuscation: Democracy and Trade Policy Transparency. American Political Science Review 100 (3):369–84.Google Scholar
Kono, Daniel Y. 2008. Democracy and Trade Discrimination. Journal of Politics 70 (4):942–55.Google Scholar
Lange, Glenn-Marie, Wodon, Quentin, and Carey, Kevin. 2018. The Changing Wealth of Nations 2018: Building a Sustainable Future. The World Bank.Google Scholar
Larson, Jennifer, and Lewis, Janet. 2018. Rumors, Kinship Networks, and Rebel Group Formation. International Organization 72 (4):871–903.Google Scholar
Lehmann, Erich Leo. 1955. Ordered Families of Distributions. Annals of Mathematical Statistics 26 (3):339–419.Google Scholar
Levchenko, Andrei A. 2007. Institutional Quality and International Trade. The Review of Economic Studies 74 (3):791–819.Google Scholar
Liu, Xuepeng. 2009. GATT/WTO Promotes Trade Strongly: Sample Selection and Model Specification. Review of international Economics 17 (3):428–46.Google Scholar
Lorentzen, Peter. 2014. China's Strategic Censorship. American Journal of Political Science 58 (2):402–14.Google Scholar
Manova, Kalina. 2013. Credit Constraints, Heterogeneous Firms, and International Trade. The Review of Economic Studies 80 (2):711–44.Google Scholar
Mansfield, Edward D., Milner, Helen V, and Pevehouse, Jon C.. 2007. Vetoing Co-operation: The Impact of Veto Players on Preferential Trading Arrangements. British Journal of Political Science 37 (3):403–32.Google Scholar
Mansfield, Edward D., Milner, Helen V., and Rosendorff, Peter B.. 2000. Free to Trade: Democracies, Autocracies, and International Trade. The American Political Science Review 94 (2):305–21.Google Scholar
Mansfield, Edward D., Milner, Helen V., and Rosendorff, Peter B.. 2002. Why Democracies Cooperate More: Electoral Control and International Trade Agreements. International Organization 56 (3):477–513.Google Scholar
Manyin, Mark E., and Nanto, Dick K.. 2011. The Kaesong North-South Korean Industrial Complex. Congressional Research Service.Google Scholar
Marshall, Monty, Gurr, Ted R., and Jaggers, Keith. 2010. Polity IV Project: Political Regime Characteristics and Transitions, 1800–2009. Center for Systemic Peace.Google Scholar
Melitz, Marc J. 2003. The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity. Econometrica 71 (6):1695–725.Google Scholar
Metternich, Nils, Dorff, Cassy, Gallop, Max, Weschle, Simon, and Ward, Michael. 2013. Antigovernment Networks in Civil Conflicts: How Network Structures Affect Conflictual Behavior. American Journal of Political Science 57 (4):892–911.Google Scholar
Milner, Helen V., and Kubota, Keiko. 2005. Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries. International Organization 59 (1):107–43.Google Scholar
Nunn, Nathan. 2007. Relationship-specificity, Incomplete Contracts, and the Pattern of Trade. The Quarterly Journal of Economics 122 (2):569–600.Google Scholar
Nunn, Nathan, and Trefler, Daniel. 2014. Domestic Institutions as a Source of Comparative Advantage. In Handbook of International Economics, 263–315. Elsevier.Google Scholar
Olsen, Randall J. 1980. A Least Square Correction for Selectivity Bias. Econometrica 48 (7):1815–20.Google Scholar
Pavcnik, Nina. 2002. Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants. The Review of Economic Studies 69 (1):245–76.Google Scholar
Pool, Ithiel De Sola. 1983. Technologies of Freedom. Belknap.Google Scholar
Przeworski, Adam, Alvarez, Michael E., Cheibub, José Antonio, and Limongi, Fernando. 2000. Democracy and Development: Political Institutions and Well-Being in the World. Cambridge University Press.Google Scholar
Ratkovic, Marc, and Tingley, Dustin. 2017. Sparse Estimation and Uncertainty with Application to Subgroup Analysis. Political Analysis 25 (1):1–40.Google Scholar
Rauch, James E. 1999. Networks Versus Markets in International Trade. Journal of International Economics 48 (1):7–35.Google Scholar
Rauch, James E., and Trindade, Vitor. 2002. Ethnic Chinese Networks in International Trade. Review of Economics and Statistics 84 (1):116–30.Google Scholar
Rogowski, Ronald. 1987. Political Cleavages and Changing Exposure to Trade. The American Political Science Review 81 (4):1121–37.Google Scholar
Rose, Andrew K. 2004. Do We Really Know That the WTO Increases Trade? The American Economic Review 94 (1):98–114.Google Scholar
Rousseau, Jean-Jacques. (1762) 1963. Du Contrat Social ou Principes du Droit Politique. Union Générale d’Éditions.Google Scholar
Russett, Bruce M., and Oneal, John R.. 2000. Triangulating Peace: Democracy, Interdependence, and International Organizations. W.W. Norton and Company.Google Scholar
Schott, Peter K. 2004. Across-product versus Within-product Specialization in International Trade. The Quarterly Journal of Economics 119 (2):647–78.Google Scholar
Shadmehr, Mehdi, and Bernhardt, Dan. 2015. State Censorship. American Economic Journal: Microeconomics 7 (2):280–307.Google Scholar
Silva, J.M.C. Santos, and Tenreyro, Silvana. 2006. The Log of Gravity. The Review of Economics and Statistics 88 (4):641–58.Google Scholar
Skaperdas, Stergios. 1996. Contest Success Functions. Economic Theory 7 (2):283–90.Google Scholar
Tavares, José. 2008. Trade, Factor Proportions, and Political Rights. The Review of Economics and Statistics 90 (1):163–68.Google Scholar
Tinbergen, Jan 1962. Shaping the World Economy: Suggestions for an International Economic Policy. Twentieth Century Fund.Google Scholar
Tomz, Michael, Goldstein, Judith L., and Rivers, Douglas. 2007. Do We Really Know That the WTO Increases Trade? Comment. The American Economic Review 97 (5):2005–18.Google Scholar
Supplementary material: PDF

Kim et al. supplementary material

Kim et al. supplementary material

Download Kim et al. supplementary material(PDF)
PDF 782.8 KB