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

In Song Kim, John Londregan, Marc Ratkovic

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)755-792
Number of pages38
JournalInternational Organization
Volume73
Issue number4
DOIs
StatePublished - Sep 1 2019

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Political Science and International Relations
  • Organizational Behavior and Human Resource Management
  • Law

Keywords

  • Extensive and intensive margins of trade
  • LASSO
  • democracy
  • differentiated products
  • international trade
  • machine learning
  • political networks
  • polity
  • variable selection
  • zero trade

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