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Measuring the Dynamic Gains from Trade

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  • Romain Wacziarg

Abstract

This article investigates the links between trade policy and economic growth in a panel of 57 countries between 1970 and 1989. It develops a new measure of trade policy openness based on the policy component of trade shares, using it in a simultaneous equations system to identify the effect of trade policy on several determinants of growth. The results suggest a positive impact of openness on economic growth, with the accelerated accumulation of physical capital accounting for more than half the total effect; enhanced technology transmission and improvements in macroeconomic policy account for smaller effects. This decomposition is robust with respect to alternative specifications and time periods. The article also successfully tests whether the model exhaustively captures the effects of trade policy on growth.

Suggested Citation

  • Romain Wacziarg, 2001. "Measuring the Dynamic Gains from Trade," The World Bank Economic Review, World Bank, vol. 15(3), pages 393-39-429.
    • Handle: RePEc:oup:wbecrv:2001:15:3:393--429
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