Work detail

Trade and Politics: Political Determinants of International Trade Flows

Author: Mgr. Jan Sosnovec
Year: 2018 - winter
Leaders: Ing. Vilém Semerák M.A., Ph.D.
Consultants:
Work type: Economic Theory
Masters
Language: English
Pages: 100
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/178964/
Abstract: This thesis takes a comprehensive look at the relationship between international trade and
politics.
The first part of this thesis is theoretical. Besides providing a useful overview of this highly
complex subject, it makes a contribution to the contemporary theory by proposing two simple
models. The first of these models explains how because of complementarity of institutions,
countries end up stuck with inefficient institutions and consequently high trade costs;
countries can break out of this inefficient equilibrium only by coordinating their actions. The
second proposed model shows how governments set trade barriers in order to pursue their
political aims, while at the same time staying popular in order to remain in power. This model
is consistent with a wide variety of regime types and ideologies, and takes into account voter
heterogeneity.
The second part of this thesis is empirical. It uses the gravity model of trade, with multilateral
resistance terms represented either by fixed effects or by the Baier-Bergstrand linear
approximation of the theoretically derived resistances. The model is estimated by the PPML
estimator. The findings are broadly consistent with the conclusions of the theoretical chapters
as well as with the previous literature. However, the results regarding the role of market
institutions and governance quality are inconsistent and somewhat puzzling.

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