Labor Productivity, Bilateral Trade, and Institutional Quality in ASEAN 6 Countries: Gravity Approach

Close relationship between countries can occur through various aspects, one of which is through the ratio of the country’s trade openness to the world. The existence of this trade openness does provide benefits for countries that are members of trade and economic communities and agreements, including ASEAN+6. The ASEAN+6 economic community is built on the basis of trade and investment promotion, with the hope that Australia, China, India, Japan, South Korea, and New Zealand will be able to provide a greater trade role to ASEAN member countries. The expected outcome of the ASEAN+6 relationship is the strengthening of the member countries’ economies, which can be seen from certain aspects. This study seeks to examine the impact of trade openness in ASEAN+6 on labor productivity by also focusing on variables in the institutional quality component. This study uses data on 15 countries that are members of ASEAN+6 for the period 2006–2020 by conducting two-stage least squares (2SLS) methods.