Testing for Trade-Induced Investment-Led Growth
AbstractMany studies have found a positive correlation between trade and growth, but do not attempt to identify the economic mechanisms involved. This paper attempts to identify one of the mechanisms linking trade and growth. In particular, we present a novel theoretical model that establishes a link between trade liberalization and investment-led growth. Estimating equations are derived from the model and estimated with three stage least squares on a cross-country data sample. We find that domestic protection depresses investment and thereby slows growth. Foreign trade barriers also lower domestic investment, but the anti-investment effect is weaker and is less robust to sample and specification changes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5416.
Date of creation: Jan 1996
Date of revision:
Publication status: published as Seghezza, Elena & Baldwin, Richard E., 2008. "Testing for Trade-Induced Investment-Led Growth," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 61(2-3), pages 507-537.
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Other versions of this item:
- F10 - International Economics - - Trade - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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