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Incremental Trade and Endogenous Growth: A q-Theory Approach

  • Richard E. Baldwin
  • Rikard Forslid

Most trade-and-growth studies focus on the growth effects of autarky-to-free-trade changes, rather than those of incremental liberalizations. This paper characterizes how the strength and sign of openness-and-growth links depend upon the nature and level of trade barriers. For most types of trade barriers, we find that liberalization raises or lowers growth depending upon the initial level of the barrier. This suggests empirical studies that pool data from high and low protection nations are mis-specified, and that policy lessons based on autarky-to-free-trade results are of limited use to policymakers.

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File URL: http://www.nber.org/papers/w6477.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6477.

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Date of creation: Mar 1998
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Publication status: published as Baldwin, Richard E. and Rikard Forslid. "Incremental Trade Policy And Endogenous Growth," Journal of Economic Dynamics and Control, 1999, v23(5-6,Apr), 797-822.
Handle: RePEc:nbr:nberwo:6477
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