Institutional Quality and Primary Sector Exports: Empirical Evidence from Indonesia
DOI:
https://doi.org/10.22452/IJIE.vol18no2.5Keywords:
Institutional quality, Primary sector, International trade, Export, Gravity modelAbstract
Primary sector trade, which consists of products extracted from natural
resources, is subject to the quality of institutions, given the volatility these commodities
face in the global market. This paper aims to examine the relationship between
institutional quality, institutional distance, and the primary sector exports of Indonesia.
Using Poisson pseudo-maximum likelihood on the augmented gravity model of export
of the primary sector between Indonesia and 188 trade partners from 2013 to 2022, the
results suggest that better institutional quality in regulatory and governance effectiveness
is significantly and positively related to primary sector exports. On the other hand,
control of corruption and rule of law produce mixed results: these indicators have a
negative but limited relationship with the primary sector exports of Indonesia, and a
positive association with the exports of its trade partners. Furthermore, differences in
institutional level favouring the trade partner have a positive relationship with primary
sector exports, implying that the institutional distance is associated with increased
exports of the primary sector.
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