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How Large Is International Trade’s Effect on Economic Growth?

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  • Joshua J. Lewer
  • Hendrik Van den Berg

Abstract

The estimated static welfare gains from international trade are very small, on the order of one percent of GDP. The case for free trade is therefore increasingly linked to trade’s apparent positive effects on economic growth. But how large are these growth effects? The vast empirical literature has emphasized the statistical significance, not the economic significance, of the trade‐growth relationship. This survey’s re‐examination of the empirical literature focuses on the size of the relationship between trade and growth. Our survey reveals that the many empirical studies are surprisingly consistent in terms of the size of the relationship: A one percentage point increase in the growth of exports is associated with a one‐fifth percentage point increase in economic growth. Given the power of compounding, the effect of trade on growth is very important for human welfare.

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  • Joshua J. Lewer & Hendrik Van den Berg, 2003. "How Large Is International Trade’s Effect on Economic Growth?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 363-396, July.
    • Handle: RePEc:bla:jecsur:v:17:y:2003:i:3:p:363-396
    DOI: 10.1111/1467-6419.00198
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