Do Democracy Measures Matter in International Trade?
C. Barry Pfitzner
Abstract
Gravity models of international trade usually focus on variables such as economic size of the partner nations (often gross domestic product), physical distance between the trading nations and other variables such as free trade agreements and common language. This work shows that additional measures of distance, political distance, are easily incorporated in gravity models. Two measures of political distance, based on published democracy indexes from the Economic Intelligence Unit of The Economist Magazine are separately incorporated into models of trade between the United States and its 10 leading partners over 16 years. The results indicate a crucial role for political distance in explaining this trade.