The Legal Knot: Impact of Legal Systems on International Trade

This study utilizes panel data from 42 countries spanning the years 2008 to 2021 to examine how legal systems impact international trade volume, and is the first to compare the effects on developing and developed countries' export volumes. Results indicate that varying legal systems are associated with lower bilateral trade volume and have a more detrimental impact on developing countries' export volume than on developed countries. Moreover, different legal systems have a lesser negative impact on export volume compared to import volume, and the impact of legal systems on trade volume has decreased over time. The study suggests that adopting standardized international sales contracts can be a beneficial step for developing countries seeking to enhance their exports.