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Learning the Wealth of Nations

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  • Francisco J. Buera
  • Alexander Monge‐Naranjo
  • Giorgio E. Primiceri

Abstract

We study the evolution of trade policies over time and across countries. We consider a model in which own and neighbors' past experiences influence policy choices, through their effect on policymakers' beliefs. We estimate the model using a large panel of countries. We find that there is a strong geographical component to learning, which is crucial to explain the slow adoption of liberal policies during the post-war period. Our model also predicts that there would be a substantial reversal to protectionism if nowadays the world was hit by a shock of the size of the Great Depression.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 79 (2011)
Issue (Month): 1 (01)
Pages: 1-45

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Handle: RePEc:ecm:emetrp:v:79:y:2011:i:1:p:1-45

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