Geography, international trade and institutions: an econometric analysis of the BRICS

Abstract

This paper discusses the role of the three deep determinants of economic development (geography, institutions and international trade) in BRICS countries (Brazil, Russia, India, China and South Africa) from 1995 to 2015. First of all, we argue that it is difficult to point out whether or not the determinants work simultaneously, since most authors do not agree with the idea of coordination. Secondly, we raise the viewpoint that institutions are very different among these nations, especially in the case of China, which has improved per capita income without fitting in the standards of the Worldwide Governance Indicators. Third, we briefly present the recent history of the bloc and apply the Hausman and Taylor (1981) method to controls for endogenous as well as time-invariant variables. We conclude that, on the one hand, geography and international trade have been important to explain the economic performance of BRICS countries without challenging the mainstream literature; on the other hand, the influence of institutions, even though relevant, does not correspond with the hypotheses rooted in the literature. China and Russia are countries with particular institutions, so the outcomes do not follow previous results about the role of institutions, suggesting that indicators may be biased toward liberal ideology.

Keywords

• instituições, comércio internacional, geografia