Working Paper: NBER ID: w25927
Authors: Douglas A. Irwin
Abstract: Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since Rodríguez and Rodrik’s (2000) critical survey of empirical work on this question, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms have a positive impact on economic growth, on average, although the effect is heterogeneous across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
Keywords: trade reform; economic growth; import barriers; productivity; cross-country regressions
JEL Codes: F13; F14; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trade reforms (F13) | Faster economic growth (O49) |
| Reduction of import barriers (F14) | Faster economic growth (O49) |
| Trade liberalization (F13) | Enhanced productivity (O49) |
| Reduction of tariffs on intermediate goods (F14) | Access to broader range of inputs (O36) |
| Access to broader range of inputs (O36) | Improved efficiency (H21) |
| Trade reforms (F13) | Heterogeneous impact on economic growth (F62) |
| Political instability or inadequate complementary reforms (O17) | Reduced growth benefits post-reform (E69) |