Table 8: Institutions and Export Margins: Firm Level Evidence

|**_Dep. Variable_**:|**_ln_**<br>**_~~E~~x_**|**_port_**|**_ln_**<br>**_~~N~~o. _**|**_of Firms_**|**_ln_**<br>**_Ave. _**|**_Export/Firm_**|
|---|---|---|---|---|---|---|
||Model (1)|Model (2)|Model (1)|Model (2)|Model (1)|Model (2)|
|Rule of law x Inst-Int|1.293<sup>_∗∗∗_</sup>|0.876<sup>_∗∗∗_</sup>|0.469<sup>_∗∗∗_</sup>|0.224<sup>_∗_</sup>|0.824<sup>_∗∗∗_</sup>|0.651<sup>_∗∗∗_</sup>|
|lnH x H-Int|1.149<sup>_∗∗∗_</sup>|0.032|0.906<sup>_∗∗∗_</sup>|-0.155|0.243<sup>_∗∗_</sup>|0.187|
|lnKr x K-Int|4.785<sup>_∗∗∗_</sup>|3.281<sup>_∗∗∗_</sup>|3.343<sup>_∗∗∗_</sup>|1.986<sup>_∗∗∗_</sup>|1.442<sup>_∗∗∗_</sup>|1.295<sup>_∗∗∗_</sup>|
|NR x N-Int|0.042<sup>_∗∗∗_</sup>|-0.006|0.029<sup>_∗∗∗_</sup>|-0.011|0.013<sup>_∗∗∗_</sup>|0.005|
|Country-Year FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Industry FE|Yes|Yes|Yes|Yes|Yes|Yes|
|Selection bias addressed|No|Yes|No|Yes|No|Yes|
|_N_|11867|8260|11867|8260|11867|8260|
|F-Statistic|102.441|18.116|37.401|3.966|186.162|43.899|
|Prob _>_ F|0.000|0.000|0.000|0.003|0.000|0.000|
|R<sup>2</sup>|0.756|0.679|0.535|0.477|0.882|0.832|
| ̄_R_<sup>2</sup>|0.749|0.668|0.523|0.458|0.879|0.826|

_∗ ∗∗ ∗∗∗ p <_ 0 _._ 1, _p <_ 0 _._ 05, _p <_ 0 _._ 01. In each case, Model (2) corrects for selection bias (the occurrence of zero-export) using the dummy variable approach, as in previous tables. Significance of coefficients is based on robust standard errors.

Focusing on the models that account for selection-bias (Model (2) in the second, fourth and sixth columns of the table), we see that institutions have a favorable differential effect on the export of contractive-intensive products. Moreover, the effect materializes through both the intensive and extensive margins. Consistent with the results from aggregate data, more of the influence comes about through the intensive margin.

# **5.3 Robustness Checks**

In this subsection, we conduct a variety of sensitivity analyses to check the robustness of our main results. We employ an alternative definition of institutional quality, re-estimate the relationship in sub-samples (within OECD, within non-OECD, within region and across region trade), and reassess the basic hypothesis with Poisson regression.

**Contract Enforcement** As our first robustness check, we re-estimate the relationships assessed earlier using an alternative measure of institutional quality – _contract enforcement_ . The results for the extended model (with regional dummy variable interactions) are presented in Table 9. As the coefficients of the interaction between a country’s contract enforcement and the sectoral contract-intensity measure indicate, there is a robust positive effect of institutional quality on export intensity that rises with the contract-intensity of sectors (in non-OECD countries). The same is true for OECD members, even though the effect is relatively smaller in the OECD sample. This confirms the results in Table 6. Moreover, and again in line with the findings in Table 6, the relatively lower return to contract enforcement in OECD (compared to non-OECD) countries holds in terms of trade volume and export value per variety, but not in terms of the number of varieties exported. According to the latter measure, OECD members tend to do better than their non-OECD counterparts though the difference is not statistically significant.

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