Do Preferential Trade Agreements Promote Growth? An Evaluation of the Caribbean Basin Economic Recovery Act
The few empirical studies which examine the effects of preferential trade liberalization on growth find no direct relationship between membership in a PTA and growth across countries. This is somewhat surprising, given the large literature which argues that trade liberalization is likely to encourage more rapid growth. However, sensitivity analysis has shown that this link between freer trade and growth may be indirect, as freer trade strongly increases investment, and higher investment strongly increases growth. This paper tests for both direct and indirect effects of preferential trade liberalization on growth and investment, by examining the impact of the Caribbean Basin Economic Recovery Act--a non-reciprocal PTA implemented by the U.S. in 1984 to encourage growth and development in Caribbean and Central American countries. A two-equation simultaneous system is estimated, using pooled data on twelve beneficiary countries, from 1970-1998. Results suggest that CBERA did not result in any "trade-induced investment-led growth." It may have had a direct impact on growth in the region, but the effect was small, and significant only when combined with trade and foreign exchange reforms on the part of the beneficiary countries themselves. However, preferential trade liberalization through the production-sharing program, and unilateral and regional trade reforms in beneficiary countries and in the US did lead to investment-led growth, and to higher growth directly, in the CBERA countries.
|Date of creation:||2002|
|Contact details of provider:|| Postal: 500 E Street SW, Washington, DC 20436|
Web page: http://www.usitc.gov/
More information through EDIRC
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.:
- Seghezza, Elena & Baldwin, Richard E., 2008.
"Testing for Trade-Induced Investment-Led Growth,"
Economia Internazionale / International Economics,
Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 61(2-3), pages 507-537.
- Richard E. Baldwin & Elena Seghezza, 1996. "Testing for Trade-Induced Investment-Led Growth," NBER Working Papers 5416, National Bureau of Economic Research, Inc.
- Baldwin, Richard & Seghezza, Elena, 1996. "Testing for Trade-induced Investment-led Growth," CEPR Discussion Papers 1331, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:ags:uitcoe:15867. 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: (AgEcon Search)
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.