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Development Through Synergistic Reform

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Author Info
James E. Rauch
Abstract

Several studies suggest that production of high-quality output is a precondition for firms in less developed countries to participate in the export market. Institutional deficiencies that raise the costs of entry into high-quality production therefore limit the positive impact that trade liberalization can have on income or growth. Institutional reform that reduces the costs of entry into high-quality production and trade reform therefore have synergistic effects on income and, possibly, growth. In contrast, institutional reform that reduces the costs of entry into low-quality production (e.g., reforms targeted at small businesses) interferes with the impact of trade reform. The model that yields these results is also used to analyze impacts of foreign direct investment and of subsidies to entrepreneurship in the presence of unemployment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13170.

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Date of creation: Jun 2007
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Handle: RePEc:nbr:nberwo:13170

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Find related papers by JEL classification:
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
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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This page was last updated on 2008-10-7.

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