| This dissertation studies the impact of institutional quality, as measured by property rights indices, on trade and foreign direct investment (FDI). The first part investigates the effect of institutional quality on the level of trade. Theoretical analysis indicates that insecurity of exchange in the form of weak property rights has a negative impact on trade; Trade is less likely to occur if shipment is less likely to be realized. Later, empirical analysis of the property rights and trade is examined using a gravity equation framework. The results suggest a significant positive impact of property rights on trade. The last part explores the effect of institutional quality on foreign direct investment (FDI). The central hypothesis is that a country with a higher degree of private property protection receives more FDI. Using the data of FDI outflows from 19 OECD countries to 49 recipients countries, the results from the empirical analysis indicate that the more protection private property received, the higher the level of FDI in that country. |
