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Does Trade Cause Growth?

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Author Info

  • David H. Romer
  • Jeffrey A. Frankel

Abstract

Examining the correlation between trade and income cannot identify the direction of causation between the two. Countries' geographic characteristics, however, have important effects on trade and are plausibly uncorrelated with other determinants of income. This paper, therefore, constructs measures of the geographic component of countries' trade and uses those measures to obtain instrumental variables estimates of the effect of trade on income. The results provide no evidence that ordinary least-squares estimates overstate the effects of trade. Further, they suggest that trade has a quantitatively large and robust, though only moderately statistically significant, positive effect on income.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.3.379
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 3 (June)
Pages: 379-399

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:3:p:379-399

Note: DOI: 10.1257/aer.89.3.379
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  1. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  2. Jeffrey A. Frankel & David Romer, 1996. "Trade and Growth: An Empirical Investigation," NBER Working Papers 5476, National Bureau of Economic Research, Inc.
  3. Colin I. Bradford Jr. & Naomi Chakwin, 1993. "Alternative Explanations of the Trade-Output Correlation in the East Asian Economies," OECD Development Centre Working Papers 87, OECD Publishing.
  4. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series 1215, The World Bank.
  5. Stanley Fischer, 1991. "Growth, Macroeconomics, and Development," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 329-379 National Bureau of Economic Research, Inc.
  6. Stanley Fischer, 1991. "Growth, Macroeconomics, and Development," NBER Working Papers 3702, National Bureau of Economic Research, Inc.
  7. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  8. Fischer, S., 1991. "Growth, Macroeconomics, and Development," Working papers 580, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-93, September.
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  1. Reichlin vs tutti, ovvero Germany vs Eurozone
    by Alberto Bagnai in Goofynomics on 2012-02-10 15:20:00
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