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Does Democracy Increase Bilateral Trade in MENA Region?

Roesmara Donna, Duddy and Widodo, Tri and Adiningsih, Sri (2018): Does Democracy Increase Bilateral Trade in MENA Region?

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This paper aims to analyze the effects of democracy to the trade of countries in MENA Regions. The Gravity Model used to test the effects of democracy on trade. Estimation is done with several models, that is FE, RE, MLE, and PPML. From this estimation can be detected endogenity problem that is caused by simultaneity between export and democracy. The FE model with the infant mortality rate as instrumental variable was chosen to address the problem. After controlling endogenity, it can be concluded that democracy positively affects (3-4 per cent) of trade in MENA Regions, especially democracy in partner countries.

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