Bilateral Trade and Islamic Sects

Abstract

This paper explores the effects of religion and Islamic sects on bilateral trade activities by employing an extended version of the gravity model. A stratified sample of 33 countries for the average period 1996-99 is selected. Although gravity models have been extensively used in the literature, to the best of our knowledge, they have neither been used to examine the impact of Islamic sects on bilateral trade nor to estimate religion within a model that incorporates oil-exporting countries, culture, regional trading arrangements, and political freedomessential control variables for the specification of the model. Findings reveal that Muslim majority countries trade less than their Christian, Jewish, Buddhist, or other counterparts. In addition, when disaggregating the Muslim sample into Sunni and Shia sects, results show that Sunni majority countries trade more than their Shiite counterparts. Other results and policy implications are discussed.