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Trade Policy and Economic Growth: a Skeptic's Guide to the Cross-National Evidence

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  • Francisco Rodriguez
  • Dani Rodrik

    ()
    (John F. Kennedy School of Government, Harvard University)

Abstract

Do countries with lower policy-induced barriers to international trade grow faster, once other relevant country characteristics are controlled for? There exists a large empirical literature providing an affirmative answer to this question. We argue that methodological problems with the empirical strategies employed in this literature leave the results open to diverse interpretations. In many cases, the indicators of "openness" used by researchers are poor measures of trade barriers or are highly correlated with other sources of bad economic performance. In other cases, the methods used to ascertain the link between trade policy and growth have serious shortcomings. Papers that we review include Dollar (1992), Ben-David (1993), Sachs and Warner (1995), and Edwards (1998). We find little evidence that open trade policies--in the sense of lower tariff and non-tariff barriers to trade--are significantly associated with economic growth.

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Bibliographic Info

Paper provided by Economic Research Forum in its series Working Papers with number 9912.

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Length: 48 pages
Date of creation: Apr 1999
Date of revision: Apr 1999
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:9912

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  1. Edward E. Leamer, 1988. "Measures of Openness," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 145-204 National Bureau of Economic Research, Inc.
  2. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Srinivasan. T.N., 1997. "As the Century Turns: Analytics, Empirics and Politics of Development," Papers 783, Yale - Economic Growth Center.
  5. O'Rourke, Kevin H, 1997. "Tariffs and Growth in the Late Nineteenth Century," CEPR Discussion Papers 1700, C.E.P.R. Discussion Papers.
  6. Holger C. Wolf, 1993. "Trade orientation measurement and consequences," Estudios de Economia, University of Chile, Department of Economics, vol. 20(esp Year ), pages 49-86, june.
  7. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  8. T. N. Srinivasan, 1997. "As the Century Turns: Analytics, Empirics and Politics of Development," Working Papers 783, Economic Growth Center, Yale University.
  9. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  10. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 1998. "Productivity and the Decision to Export: Micro Evidence from Taiwan and South Korea," NBER Working Papers 6558, National Bureau of Economic Research, Inc.
  11. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
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