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Trade and Growth: An Empirical Investigation

  • Jeffrey A. Frankel
  • David Romer

Countries' geographic characteristics have important effects on their trade, and are plausibly uncorrelated with other determinants of their incomes. This paper therefore constructs measures of the geographic component of countries' trade and uses those measures to obtain instrumental variables estimates of the effect of trade on income. The results suggest that ordinary least squares estimates understate the effects of trade, and that trade has a quantitatively large, significant, and robust positive effect on income.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5476.

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Date of creation: Mar 1996
Date of revision:
Publication status: published as American Economic Review, Vol. 89, no. 3 (June 1999): 379-399.(Published under title "Does Trade Cause Growth?")
Handle: RePEc:nbr:nberwo:5476
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  1. Colin I. Bradford Jr. & Naomi Chakwin, 1993. "Alternative Explanations of the Trade-Output Correlation in the East Asian Economies," OECD Development Centre Working Papers 87, OECD Publishing.
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  8. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  9. Stanley Fischer, 1991. "Growth, Macroeconomics, and Development," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 329-379 National Bureau of Economic Research, Inc.
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  13. Charles R. Nelson & Richard Startz, 1988. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," NBER Technical Working Papers 0068, National Bureau of Economic Research, Inc.
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  17. Michaely, Michael, 1977. "Exports and growth : An empirical investigation," Journal of Development Economics, Elsevier, vol. 4(1), pages 49-53, February.
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  19. Pack, Howard & Page, John Jr., 1994. "Accumulation, exports, and growth in the high-performing Asian economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 199-235, June.
  20. Dani Rodrik, 1993. "Trade and Industrial Policy Reform in Developing Countries: A Review of Recent Theory and Evidence," NBER Working Papers 4417, National Bureau of Economic Research, Inc.
  21. Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc.
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  23. Jong-Wha Lee, 1992. "International Trade, Distortions and Long-Run Economic Growth," IMF Working Papers 92/90, International Monetary Fund.
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