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Trade Liberalization, Growth, and FDI: A Structural Estimation Framework

Author

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  • Larch, Mario
  • Anderson, James E.
  • Yotov, Yoto V.

Abstract

We develop a structural framework that accounts for and decomposes the relationships between trade, physical capital accumulation, and FDI. As a byproduct, our theory delivers a FDI-gravity system. The FDI-gravity estimates are similar to the corresponding trade indexes, however, we also document some notable differences between them. A counterfactual experiment simulating the effects of trade liberalization between Canada and the EU demonstrates the capabilities of our framework.

Suggested Citation

  • Larch, Mario & Anderson, James E. & Yotov, Yoto V., 2017. "Trade Liberalization, Growth, and FDI: A Structural Estimation Framework," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168071, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc17:168071
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    References listed on IDEAS

    as
    1. Anderson, James & Larch, Mario & Yotov, Yoto, 2015. "Growth and Trade with Frictions: A Structural Estimation Framework," School of Economics Working Paper Series 2015-2, LeBow College of Business, Drexel University.
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    6. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    7. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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