Political Trade : A study of the relationship between bilateral trade flows and regime type

Sammanfattning: In this study we examine how bilateral trade flows are affected by regime type. Previous research with the aim to investigate the effect of regime type on bilateral trade has primarily used a binary definition of democracy, and findings have indicated that democracies trade more extensively with other democracies. In this thesis, we add to the existing literature by disaggregating regime types, defining liberal democracies, electoral democracies and authoritarian regimes, and adopt the well-proven methodology of the gravity model of trade in OLS regressions. We use trade data adopted from IMF in the years 2004 and 2014 covering 162 countries. Data on the main explanatory variable, regime type, is defined in accordance with democracy indicator Freedom House’s methodology. Results show that pairs consisting of two liberal democracies have the highest values of trade flows, compared to other combinations of trading regime type-pairs. However, due to methodological discrepancies and ambiguous estimates, the relationship between regime type and trade flows remains uncertain.