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No miracles here: Trade policy, fiscal policy and economic growth

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  • Richard Kneller

Abstract

In this paper we consider whether the rate of growth following trade liberalisation differs significantly from growth in other developing countries. We find that it does not. Given this result we explore whether these growth effects are offset by changes in other policy variables, namely changes in fiscal policy. Governments increase welfare spending as a response to greater exposure to international trade. We find evidence that countries that liberalise their trade regimes increase their spending on welfare but not other forms of expenditure. However, once we control for the effects of fiscal policy, trade liberalisation still has no growth effects.

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  • Richard Kneller, 2007. "No miracles here: Trade policy, fiscal policy and economic growth," Journal of Development Studies, Taylor & Francis Journals, vol. 43(7), pages 1248-1269.
    • Handle: RePEc:taf:jdevst:v:43:y:2007:i:7:p:1248-1269
    DOI: 10.1080/00220380701526386
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    6. Yao‐Yu Chih & Ruby P. Kishan & Andrew Ojede, 2022. "Be good to thy neighbours: A spatial analysis of foreign direct investment and economic growth in sub‐Saharan Africa," The World Economy, Wiley Blackwell, vol. 45(3), pages 657-701, March.

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