Working Paper: CEPR ID: DP3944
Authors: Oxana Koukhartchouk; Mathilde Maurel
Abstract: This Paper asks the question of the impact of institutions on trade and tries to estimate the potential for trade increase between CIS, Central Eastern European countries and the EU. The latter is computed using the gravity equation and the procedure introduced by Hausman and Taylor (1981). It is shown that CIS trade is still characterized by a very large trade destruction effect, which implies that trade with EU countries could increase in the long-run in proportion to this trade destruction effect. Furthermore, institutions matter, and the convergence of institutional variables towards the EU standards - under the current process of EU enlargement and application of Russia to join the WTO - can be expected to deepen the level of the European trade integration.
Keywords: Accession to the WTO; EU enlargement; Gravity equation; Institutions; Transition
JEL Codes: C10; F10; P20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| institutional convergence towards EU standards (F55) | trade integration (F15) |
| improvements in institutional quality (O17) | increased trade intensity (F19) |
| trade openness (F43) | better institutions (O43) |
| better institutions (O43) | trade openness (F43) |