Trade and Employment From Myths to Facts - International Labour ...

Trade and Employment: From Myths to Facts
7.A.4 Description of the drivers of diversification
Market access:
Countries belonging to free trade areas and customs unions obtain privileged access
to each other’s markets that do not have to be granted to non-members. To capture
this aspect of market access we compute, for each country i, a weighted sum of all
the preferential trade agreements (PTAs) it participates in. The weights correspond
to partner’s market size (as measured by GDP).
where i is the exporter country, k the importer one, t the year and w the world.
This variable is computed by the authors following Dutt, Mihov and van Zandt
(2009). PTAs come from Jeffrey Bergstrand’s database, available at:
http://www.nd.edu/~jbergstr/. For each country pair and year, we define PTA=1 if
the exporter benefits from a reciprocal preferential access to the importer’s market. 30
Remoteness:
The remoteness index, also called “multilateral resistance” term , is defined as:
where i is the exporter country, k the importer one, t the year and w the world.
This variable was computed by Carrère, de Melo and Wilson (2011) on the basis
of Rose (2004).
Infrastructure index:
This variable was computed by Carrère, de Melo and Wilson (2011), using data
from the telecommunication sector (number of main telephone lines per 1000
workers), the transportation sector (the length of the road and railway network —in
km per km 2 of land area) and an index of quality in the service of transport (the
share of paved roads in total roads). These raw data come from Canning (1998) and
the World Development Indicators (WDI) database (see Carrère, de Melo and Wilson,
2011, appendix A2 for more details).
Politics variables:
We use two variables reflecting the political regime and quality of government. Both
variables come from the QoG database built up by Teorell et al. (2009). This database
30 This database records the economic integration of bilateral country pairings for 195 countries annually
from 1960 through 2005. Depending on the level of economic integration, a country pairing
was assigned a code varying from 0 to 6. We convert this code into a 0/1 dummy.
304