| Abstract: |
We work with a panel of bilateral trade flows from 1988 to 2002, exploring the
influence of infrastructure, institutional quality, colonial and geographic
context, and trade preferences on the pattern of bilateral trade. We are
interested in threshold effects, and so emphasize those cases where bilateral
country pairs do not actually trade. We depart from the institutions and
infrastructure literature in this respect, using selection-based gravity
modeling of trade flows. We also depart from this literature by mixing
principal components (to condense our institutional and infrastructure
measures) with a focus on deviations from expected values for given income
cohorts to control for multicollinearity. Infrastructure, and institutional
quality, are significant determinants not only of export levels, but also of
the likelihood exports will take place at all. Our results support the notion
that export performance, and the propensity to take part in the trading system
at all, depends on institutional quality and access to well developed
transport and communications infrastructure. Indeed, this dependence is far
more important, empirically, than variations in tariffs in explaining sample
variations in North-South trade. This implies that policy emphasis on
developing country market access, instead of support for trade facilitation,
may be misplaced. |