Working Paper: CEPR ID: DP2390
Authors: Dan Bendavid; Ayal Kimhi
Abstract: To the extent that trade policy affects trade flows between countries, the ramifications can be far-reaching from an economic growth perspective. This paper examines one aspect of these ramifications, namely the impact of changes in the extent of trade between countries on changes in the rate of reduction in the size of the income gap that exists between them. Export and import data are used as the criteria for determining bilateral trade between major trade partners, resulting in the creation of 127 pairs of countries on the basis of export data and 134 pairs on the basis of import data. An increase in trade between major trade partners - and in particular, increased exports by poorer countries to their wealthier partners - is shown to be related to an increase in the rate of convergence between the countries.
Keywords: trade; growth; convergence
JEL Codes: F10; O10; O50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased imports by poorer countries (F69) | unclear impact on convergence rates (F62) |
| increased trade flows from wealthier countries to poorer ones (F69) | complex interaction on convergence (F62) |
| increased exports from poorer countries (F63) | increased convergence rates (O47) |
| trade liberalization (F13) | reduction in income differentials among liberalizing countries (F62) |