Institutions and trade: competitors or complements in economic development?

Abstract

In this paper we contribute to the debate over the empirical relationship between trade openness and economic development. Unlike previous studies which treat trade openness and institutions as competitors in economic development, we find evidence that they are in fact complements. We also find that in order for a country to benefit from trade, its institutional quality has to be above a threshold level. These results are suggestive of a very important complementary role of both trade openness and institutions in economic development. Show more