Does Democracy Cause Regional Disintegration? The Effect of Democracy on ASEAN Intra-regional and Extra-regional Trade

  • Faris Maulana
  • Fithra Faisal Hastiadi


Association of Southeast Asian Nations (ASEAN) is a regional organization that has successfully formed a free trade agreement, namely ASEAN Free Trade Area (AFTA). Despite AFTA’s success in decreasing internal tariff among its member countries, another form of trade barrier, which is non-tariff barrier (NTB), has increased over time. On the other hand, ASEAN member countries have diverse levels of democracy, which implies different political motives of trade policy determination, which in turn affect their trade pattern. This study attempts to explore the effect of ASEAN member countries’ democracy on ASEAN trade with other ASEAN countries and non-ASEAN countries. By utilizing the data panel of trade from 2005 to 2014 and polity score as the proxy for democracy and conducting an inferential analysis based on gravity model of trade, it is found that democracy has different effects on intra-ASEAN trade and extra-ASEAN trade. Democracy has a negative effect on ASEAN intra-regional trade, yet it has a positive effect on ASEAN extra-regional trade. From these two results, it is found that democratization of ASEAN countries causes a trade diversion from ASEAN country to non-ASEAN country, which eventually implies a decrease in regional economic integration.


ASEAN Gravity model Non-tariff barrier AFTA Panel data Intra-regional trade 


  1. Anderson, J. E. (1979). A Theoretical Foundation for the Gravity Equation. The American Economic Review, 69(1), 106–116.Google Scholar
  2. Anderson, J. E., & Van Wincoop, E. (2004). Trade Costs. Journal of Economic Literature, 42(3), 691–751.CrossRefGoogle Scholar
  3. ASEAN. (n.d.). ASEAN Free Trade Area (AFTA Council). Retrieved April 9, 2018, from
  4. Asia Regional Integration Center. (n.d.). Integration Indicators. Retrieved April 9, 2018, from
  5. Barro, R. J. (1996). Democracy and Growth. Journal of Economic Growth, 1(1), 1–27.CrossRefGoogle Scholar
  6. Barro, R. J. (1999). Determinants of Democracy. Journal of Political Economy, 107(S6), S158–S183.CrossRefGoogle Scholar
  7. Bohara, A. K., Gawande, K., & Sanguinetti, P. (2004). Trade Diversion and Declining Tariffs: Evidence from Mercosur. Journal of International Economics, 64(1), 65–88.CrossRefGoogle Scholar
  8. Centre d’Etudes Prospectives et d’Informations Internationales. (n.d.-a). TRADHIST. Retrieved March 20, 2018, from
  9. Centre d’Etudes Prospectives et d’Informations Internationales. (n.d.-b). Gravity. Retrieved March 20, 2018, from
  10. Davenport, C., & Armstrong, D. A. (2004). Democracy and the Violation of Human Rights: A Statistical Analysis from 1976 to 1996. American Journal of Political Science, 48(3), 538–554.CrossRefGoogle Scholar
  11. Emmerson, D. K. (2005). Security, Community, and Democracy in Southeast Asia: Analyzing ASEAN. Japanese Journal of Political Science, 6(2), 165–185.CrossRefGoogle Scholar
  12. Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The Next Generation of the Penn World Table. American Economic Review, 105(10), 3150–3182.CrossRefGoogle Scholar
  13. Gerring, J., Bond, P., Barndt, W. T., & Moreno, C. (2005). Democracy and Economic Growth: A Historical Perspective. World Politics, 57(3), 323–364.CrossRefGoogle Scholar
  14. Grossman, G. M., & Helpman, E. (1992). Protection for Sale (No. w4149). Massachusetts: National Bureau of Economic Research.Google Scholar
  15. Gujarati, D. N. (2009). Basic Econometrics. New York: Tata McGraw-Hill Education.Google Scholar
  16. Head, K., & Mayer, T. (2014). Gravity Equations: Workhorse, Toolkit, and Cookbook. In Handbook of International Economics (Vol. 4, pp. 131–195). Amsterdam: Elsevier.Google Scholar
  17. Heckscher, E. F., & Ohlin, B. G. (1991). Heckscher-Ohlin Trade Theory. Massachusetts: The MIT Press.Google Scholar
  18. Hoechle, D. (2007). Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence. Stata Journal, 7(3), 281.CrossRefGoogle Scholar
  19. Hollyer, J. R., Rosendorff, B. P., & Vreeland, J. R. (2011). Democracy and Transparency. The Journal of Politics, 73(4), 1191–1205.CrossRefGoogle Scholar
  20. Ing, L. Y., de Cordoba, S. F., & Cadot, O. (2016). Non-Tariff Measures in ASEAN. ERIA Discussion Paper Series. Jakarta: ERIA and UNCTAD.Google Scholar
  21. Integrated Network for Societal Conflict Research. (n.d.). INSCR Data Page. Retrieved March 20, 2018, from
  22. Kennan, J., & Riezman, R. (1990). Optimal Tariff Equilibria with Customs Unions. The Canadian Journal of Economics, 23(1), 70.CrossRefGoogle Scholar
  23. Knack, S. (2004). Does Foreign Aid Promote Democracy? International Studies Quarterly, 48(1), 251–266.CrossRefGoogle Scholar
  24. Kono, D. Y. (2006). Optimal Obfuscation: Democracy and Trade Policy Transparency. American Political Science Review, 100(3), 369–384.CrossRefGoogle Scholar
  25. Manchin, M. & Annette O.Pelkmans-Balaoing (2008). Clothes without an Emperor: Analysis of the preferential tariffs in ASEAN. Journal of Asian Economics, 19(3), 213–223.Google Scholar
  26. Mansfield, E. D., & Busch, M. L. (1995). The Political Economy of Nontariff Barriers: A Cross-National Analysis. International Organization, 49(4), 723–749.CrossRefGoogle Scholar
  27. Mansfield, E. D., Milner, H. V., & Rosendorff, B. P. (2000). Free to Trade: Democracies, Autocracies, and International Trade. American Political Science Review, 94(2), 305–321.CrossRefGoogle Scholar
  28. Mansfield, E. D., Milner, H. V., & Rosendorff, B. P. (2002). Why Democracies Cooperate More: Electoral Control and International Trade Agreements. International Organization, 56(3), 477–513.CrossRefGoogle Scholar
  29. Marshall, M. G., Gurr, T. D., & Jaggers, K. (2016). Polity IV Project. Political Regime Characteristics and Transitions, 1800–2015. Dataset Users’ Manual. Center for Systemic Peace.Google Scholar
  30. Milner, H. V., & Kubota, K. (2005). Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries. International Organization, 59(1), 107–143.CrossRefGoogle Scholar
  31. Minten, B., & Reardon, T. (2008). Food Prices, Quality, and Quality’s Pricing in Supermarkets Versus Traditional Markets in Developing Countries. Review of Agricultural Economics, 30(3), 480–490.CrossRefGoogle Scholar
  32. Morrow, J. D., Siverson, R. M., & Tabares, T. E. (1998). The Political Determinants of International Trade: The Major Powers, 1907–1990. American Political Science Review, 92(3), 649–661.CrossRefGoogle Scholar
  33. O’Rourke, K. H., & Taylor, A. M. (2006). Democracy and Protectionism (No. w12250). Massachusetts: National Bureau of Economic Research.Google Scholar
  34. Plummer, M. G., & Click, R. W. (2006). The ASEAN Economic Community and the European Experience. Asian Development Bank, Working Papers on Regional Economic Integration.Google Scholar
  35. Rodrik, D. (2000). Institutions for High-Quality Growth: What They Are and How to Acquire Them. Studies in Comparative International Development, 35(3), 3–31.CrossRefGoogle Scholar
  36. Stolper, W. F., & Samuelson, P. A. (1941). Protection and Real Wages. The Review of Economic Studies, 9(1), 58–73.CrossRefGoogle Scholar
  37. Tinbergen, J. (1962). Shaping the World Economy: Suggestions for an International Economic Policy. New York: Twentieth Century Fund.Google Scholar
  38. Yip, P. S., & Tsang, E. W. (2007). Interpreting Dummy Variables and Their Interaction Effects in Strategy Research. Strategic Organization, 5(1), 13–30.CrossRefGoogle Scholar
  39. Yogatama, A. R., & Hastiadi, F. F. (2016). The Role of Democracy and Governance in the Enhancement of Indonesian Exports to the Organization of the Islamic Cooperation (OIC) Countries. Journal of Economic Cooperation & Development, 37(4), 51.Google Scholar
  40. Yu, M. (2010). Trade, Democracy, and the Gravity Equation. Journal of Development Economics, 91(2), 289–300.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Faris Maulana
    • 1
  • Fithra Faisal Hastiadi
    • 2
  1. 1.Ministry of IndustryJakartaIndonesia
  2. 2.Universitas IndonesiaDepokIndonesia

Personalised recommendations