DP15667 Quality of government and regional trade: Evidence from European Union regions

Author(s): Javier Barbero Jiménez, Giovanni Madras, Ernesto Rodríguez-Crespo, Andrés Rodríguez-Pose
Publication Date: January 2021
Keyword(s): gravity model of trade, institutions, quality of government, regional policy, structural estimation, Trade
JEL(s): E02, F15, R10
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15667

This paper examines â?? using a novel database of regional trade flows between 267 European regions for 2013 â?? how government quality affects trade between European Union (EU) regions. The results of a structural gravity cross-sectional analysis of trade show that trade across EU regions is highly influenced by differences in regional government quality. This influence varies by sector of economic activity and by the level of economic development of the region. The results indicate that, if the less developed regions of the EU want to engage in greater interregional trade, improving their institutional quality is a must.