Dynamic panel data evidence on the trade-income relation
AbstractThis 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 InfoPaper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20647.
Date of creation: 2005
Date of revision:
Publication status: Published in Review of World Economics 4 141(2005): pp. 583-611
Other versions of this item:
- Gabriel J. Felbermayr, 2005. "Dynamic Panel Data Evidence on the Trade-Income Relation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(4), pages 583-611, December.
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