Effects of institutional quality and institutional distance on the export performance in transition economies: empirical evidence from Kosovo

This study examines the impact of institutional quality and institutional distance on Kosovo’s export performance, offering insights on trade dynamics in transition economies. Utilising a gravity model with Poisson Pseudo-Maximum Likelihood (PPML) estimation, the analysis covers Kosovo’s exports to 45 partners between 2005 and 2023. Results reveal that stronger institutional quality significantly enhances exports, whereas greater institutional distance with trading partners reduces flows, emphasising the importance of institutional alignment. Control variables further highlight the role of diaspora networks, labour competitiveness, and regional trade agreements such as CEFTA in promoting exports, while the Stabilisation and Association Agreement (SAA) with the EU produces mixed effects. Policy recommendations emphasise the need for Kosovo to prioritise institutional reforms, particularly in governance, regulatory quality, and judicial effectiveness, to bolster export competitiveness and foster deeper integration into regional and global markets.