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Essay On Cross Section Analysis

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I take two different approaches to measure the effect of ISO 9001 certifications on industry trade: The cross-section and panel analysis. In the first stage of my empirical analysis, I replicate the Nunn (2007)’s findings with the cross-section structure. The main aim of the cross-section analysis is to exploit cross-country variation in institutional quality and ISO certifications. Considering the fact time variation is not much pronounced in institutional quality measures, it is a good identification strategy to apply cross-section structure. My focus is on the interaction term, industry contract intensity and country rule of law indicator, because I am interested in how institution-driven comparative advantage interacts with intensity of contracts in industries. Pursuing same interests, then I redo the same cross section regression by interacting industry specific variable, contract intensity, and country specific variable, ISO9001 certifications. In the second stage of my analysis, I use the panel …show more content…

The findings do not show the casual impact of ISO certifications and rule of law indicator on the pattern of trade due to the possible omitted variable bias. There can be factors that are omitted from estimation equations and have an impact on the pattern of trade. They tend to bias interested coefficients. Moreover, causality may stem from comparative advantage to quality of domestic institutions or to the adoption of ISO certifications. Countries that specialize in contract intensive sectors may have good domestic institutions (Nunn, 2007). With the same logic, countries that specialize in contract intensive sectors may have an incentive to hold higher ISO certifications. Because of those reasons, the impact should not be interpreted as causality, but nice correlations that give insights about comparative advantage determinants and policy implications regarding adoption of ISO

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