# **4 Data**

This section presents the description of the variables and the main data sources used in the paper.

**Trade Data** Trade data are obtained from two sources: BACI database and the World Bank Exporter Dynamics Database (EDD). We obtain trade flows (in thousands of US dollars) at the 6-digit HS2007 level from the BACI database, constructed by CEPII based on the UN-Comtrade data (Gaulier & Zignago 2010). Since the data on an important component of our main independent variable (contractintensity of industries) are available only at ISIC Revision-2 3-digit level, conversions are needed. To this end, we used the World Integrated Trade Solution (WITS) product concordance table<sup>3</sup> to convert data from HS2007 to ISIC-Revision 2. This is used as the dependent variable in the base model. Other models employ the number of product varieties – the count of HS2007 6-digit products within an ISIC Revision 2 3-digit product group – and average exports per variety. In models that estimate the effect of institutions on the volume of exports to the whole world, the number of export destinations, or average exports per destination – instead of bilateral trade flows – the trade data are further aggregated over all importers, thereby changing the observation identifier from exporter-importer-industry-year to exporter-industry-year.

Despite the large proportion of zero-trade entries, we have data for 215 exporters, 222 destinations, 29 industries and 8 years. An industry (ISIC 312) is dropped due to missing values on factor-intensity, and a large number of observations are automatically dropped due to missing values in one or the other variable. Depending on the model estimated, this leaves us with 632,363 - 1,662,720 observations (in the full set of countries) out of the potential of over 11 million observations.

In the more granular analysis, we rely on the World Bank’s Exporter Dynamics Database (EDD), which is based on firm-level customs data covering the universe of export transactions provided by customs agencies from 69 countries.<sup>4</sup> The description of the database is provided in Fernandes et al. (2016). EDD contains aggregated measures on export sector characteristics and dynamics at different levels of aggregation. For our analysis, we are mainly interested in two indicators of the dataset: the number of exporting firms and average export per firm, which is constructed at the country-year-industry level.

**Country-level Measures** Data on institutional quality indicators are obtained from two sources: the Worldwide Governance Indicators (WGI) database of the World Bank and the Economic Freedom of the World (EFW) of the Fraser Institute. While various indicators from these sources have been used in some robustness checks, the main indicators used are the _rule of law_ from the former and the _contract enforcement_ variable from the latter source. These are chosen because they correspond to the theoretical channels proposed to link institutions to the pattern of trade, better than the other indicators.

Natural resource endowment figures – total natural resource rent as percentage share of GDP – are extracted from the World Development Indicators (WDI) database of the World Bank. Exporter and importer GDP (both in constant 2010 US dollars) are also extracted from WDI. Human capital

> 3 The conversion table is available at _http_ : _//wits.worldbank.org/product concordance.html_

> 4 The aggregate measures are publicly available at _http_ : _//www.worldbank.org/en/research/brief/exporter − dynamics − database_

8