This paper re-examines the evidence linking poor growth during the era of import substituting industrialization with trade restrictions. Recent work, notably Rodriguez and Rodrik (2000), asserts that all the evidence is fragile, implying that economists who believe that trade restrictions played a role in this poor performance do so largely on faith. This paper argues that this criticism ignores crucial evidence and tests regression specifications that are either not relevant for the question or are bound to have low statistical power. After revising and updating measures of trade openness used in Sachs and Warner (1995), the weight of the evidence argues that trade restrictions were indeed harmful to growth during this period. While there is certainly room for debate about how best to use the available data on trade restrictions, a large number of variants yield strong and consistent results. Furthermore, although some assert that it is impossible to empirically distinguish measures of trade restriction from other policies or institutions, the findings are not diminished even after controlling for many alternative economic policies or institutions.
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Paper provided by Center for Global Development in its series Working Papers with number
34.
Find related papers by JEL classification: F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F15 - International Economics - - Trade - - - Economic Integration F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
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Francesco Giavazzi & Guido Tabellini, 2004.
"Economic and Political Liberalizations,"
Working Papers
264, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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