Institutions and Fuels Trade: a Quantitative Analysis

The thesis investigates whether there is a link between governance quality and fuels dependence, from the side of both exporting and importing countries. The underpinning argument consists in the fact that a more archaic institutional environment fosters trade in polluting energy sources while hindering renewables sector development.
Institutional quality is measured employing the most widespread benchmark in literature, the World Governance Indicators: a subjective and composite index that measures governance along six dimensions. In order to interpret correctly thesis’ findings, it is important to highlight that, since the World Bank index has a subjective nature, results are referred to the perceived institutional framework, which it is likely not to fully mirror the actual one.
The quantitative analysis exploits the panel feature of data, using the fixed-effects model with time dummy variables. Its main advantage is that not only it eliminates the effect of unobserved country characteristics but also the time related influence, resulting in more precise coefficients. Moreover, a series of control variables is inserted in order to capture main international trade determinants. The analysis is conducted on a twofold basis, keeping separate the exporting side from the importing, and draws different conclusions.
The point the thesis wants to demonstrate is that improving national institutions constitutes an effective policy towards the reduction, on one hand, of the economic dependence from fuels for exporting countries and, on the other, of the energetic dependence for importing countries.