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Does free trade really reduce growth? Further testing using the economic freedom index

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Author Info
Berggren, Niclas () (The Ratio Institute)
Jordahl, Henrik (Department of Economics)

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Abstract

While studies of the relationship between economic freedom and economic growth have shown it to be positive, significant and robust, it has rightly been argued that different areas of economic freedom may have quite different effects on growth. Along that line, Carlsson and Lundström (2002) present the surprising result that “International exchange: Freedom to trade with foreigners” is detrimental for growth. We find that “Taxes on international trade” seems to drive this result. However, using newer data and a more extensive sensitivity analysis, we find that it is not robust. Least Trimmed Squares-based estimation in fact renders the coefficient positive.

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Paper provided by The Ratio Institute in its series Ratio Working Papers with number 25.

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Length: 31 pages
Date of creation: 03 Jun 2003
Date of revision:
Publication status: Published in Public Choice, 2005, pages 99-114.
Handle: RePEc:hhs:ratioi:0025

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Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
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Related research
Keywords: free trade; economic freedom; economic growth;

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Find related papers by JEL classification:
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bergh, Andreas, 2006. "Explaining Welfare State Survival: The Role of Economic Freedom and Globalization," Ratio Working Papers 101, The Ratio Institute. [Downloadable!]
  2. Blomquist, Sören & Christiansen, Vidar, 2004. "Taxation and Heterogeneous Preferences," Working Paper Series 2004:9, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  3. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK. [Downloadable!]
  4. Berggren, Niclas & Jordahl, Henrik, 2003. "Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index," Working Paper Series 2003:26, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  5. Rami Abdelkafi & Hatem Derbel, 2008. "The effects of economic freedom components on economic growth: an analysis with a threshold model," EconomiX Working Papers 2008-3, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
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