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Dynamic Panel Data Evidence on the Trade-Income Relation

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  • Gabriel J. Felbermayr

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Abstract

This paper revisits the relationship between a country’s openness and its per capita income. Building on Frankel and Romer, it argues that a dynamic econometric specification similar to the ones used in empirical growth studies better fits the theoretical literature and also resolves some otherwise unresolved inconsistencies. The preferred econometric method is Blundell and Bond’s system-GMM estimator, which allows dealing with measurement error, weak instruments, and time-invariant country-specific effects. The findings confirm the existence of a strong effect of trade on income but fail to find evidence for trade as an independent factor of divergence.

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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 141 (2005)
Issue (Month): 4 (December)
Pages: 583-611

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Handle: RePEc:spr:weltar:v:141:y:2005:i:4:p:583-611

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Related research

Keywords: Growth empirics; trade; convergence; generalized methods of moments;

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References

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  1. Gabriel J. Felbermayr, 2007. "Specialization on a technologically stagnant sector need not be bad for growth," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 682-701, October.
  2. Beck, T.H.L. & Levine, R. & Loayza, N., 2000. "Financial intermediation and growth: Causality and causes," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125519, Tilburg University.
  3. Acemoglu, Daron & Ventura, Jaume, 2001. "The World Income Distribution," CEPR Discussion Papers 2973, C.E.P.R. Discussion Papers.
  4. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 557-586, May.
  7. Francisco Alcalá & Antonio Ciccone, 2003. "Trade and Productivity," Working Papers 12, Barcelona Graduate School of Economics.
  8. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
  10. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 1127-70, November.
  11. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
  12. Benhabib, Jess & Spiegel, Mark M, 2000. " The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-60, December.
  13. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
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Citations

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Cited by:
  1. Dierk Herzer, 2011. "Cross-country heterogeneity and the trade-income relationship," Ibero America Institute for Econ. Research (IAI) Discussion Papers 209, Ibero-America Institute for Economic Research.
  2. Huang, Bwo-Nung & Hwang, M.J. & Yang, C.W., 2008. "Causal relationship between energy consumption and GDP growth revisited: A dynamic panel data approach," Ecological Economics, Elsevier, vol. 67(1), pages 41-54, August.
  3. Claudia M. Buch & Paola Monti & Farid Toubal, 2008. "Trade's Impact on the Labor Share: Evidence from German and Italian Regions," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 46, Institut für Angewandte Wirtschaftsforschung (IAW).
  4. Claudia M. Buch & Paola Monti, 2008. "Openness and Income Dispaities: Does Trade Explain the 'Mezzogiorno' Effect?," IAW Discussion Papers, Institut für Angewandte Wirtschaftsforschung (IAW) 41, Institut für Angewandte Wirtschaftsforschung (IAW).
  5. Mariam Camarero & Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmenn D. & Cecilio Tamarit, 2013. "Trade Openness and Income: A Tale of Two Regions," Ibero America Institute for Econ. Research (IAI) Discussion Papers 226, Ibero-America Institute for Economic Research.
  6. Omar Neme Castillo & Ana Lilia Valderrama Santibáñez & Humberto Ríos Bolívar, 2013. "Comercio internacional, IED, capital humano e ingreso per cápita en América Latina y el Caribe," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 101-139, May.

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