A further investigation of the link between trade and income
The link between openness and income has received increasing attention as countries try to justify their trade-promoting policies. Recent work of Frankel & Romer (1999) examines the effect of trade on income. We explore how the estimates of the trade effect change when we relax their assumption of heteroscedasticity in the bilateral trade equation they use to construct the instrument for the IV regression. Because the instrument is constructed through a nonlinear transformation, unequal disturbance variances imply inconsistency and not just inefficiency of the Frankel-Romer estimates. We find a smaller positive effect of trade than that found by Frankel & Romer.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 20 (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RIEJ20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RIEJ20|
References listed on IDEAS
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.:
- Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
- Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- Wacziarg, Romain, 1998.
"Measuring the dynamic gains from trade,"
Policy Research Working Paper Series
2001, The World Bank.
- Levine, Ross & Renelt, David, 1992.
"A Sensitivity Analysis of Cross-Country Growth Regressions,"
American Economic Review,
American Economic Association, vol. 82(4), pages 942-63, September.
- Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
- David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
- Durlauf, Steven N., 2001. "Manifesto for a growth econometrics," Journal of Econometrics, Elsevier, vol. 100(1), pages 65-69, January.
- Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
- White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
- Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
- Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:20:y:2006:i:1:p:19-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.