Politics, Policy, and Institutions as drivers of trade openness: A theoretical inquiry

Abstract

This article aims to deepen our understanding of the determinants of trade openness by developing a hierarchical theoretical framework that explains it as a multidimensional outcome shaped by an integrated causal chain of institutional, political, and policy factors, moving beyond the predominant focus on economic variables in existing literature. The framework conceptualizes trade openness hierarchically, where institutions form the foundational layer structuring political behavior, enforcing rules, and ensuring policy credibility. These institutions shape political dynamics, including regime type, interest group power, and stability, which in turn endogenously determine trade policy choices. Trade policy serves as the direct determinant, translating political choices into measurable trade outcomes. The original contribution of this framework lies in its integration of institutional, political, and policy dimensions into a single coherent causal architecture, offering a more complete and theoretically rigorous explanation of trade openness than either purely economic models or partial political-economy accounts provide. By establishing that a country's outward orientation cannot be fully understood without analyzing the governance structures that condition whether economic potential is realized, this framework bridges gaps across the institutional economics, comparative politics, and international trade literatures, and provides researchers and policymakers with a comprehensive analytical tool for diagnosing the deep determinants of trade performance.