Quality of government and regional trade in the EU

The quality of government and institutions is a crucial factor for socio-economic prosperity. A recent JRC analysis by Barbero et al. (2021) using EU regional data shows that the trade performance depends on the quality of government, as described in the European Quality of government index (EQI).

In particular, better quality of government facilitates trade flows across EU regions. The greatest trade volumes happen between regions with high and similar institutional quality.

Finally, better institutions are more important in explaining inter- than intra-national trade. The quality of government has a higher impact on trade flows going from less developed regions to richer ones. Thus, regions with a lower government quality could benefit more from improvements in institutional quality.

This implies that place-based territorial policies targeting improvements in regional institutional quality can affect the gains from trade.

These conclusions are based on the Regional Studies article “Quality of government and regional trade: evidence from European Union regions”

This research is part of JRC’s work on Regional Economic Modelling in support to EU policy making. Its key instrument is the spatial computable general equilibrium model RHOMOLO, although Input-Output and econometric models are also used.

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Quality of government and regional trade in the EU.