Working Paper: NBER ID: w7081
Authors: Mark Twain; David Dollar; Joseph Stiglitz; Edwards
Abstract: Do countries with lower policy-induced barriers to international trade grow faster, once other relevant country characteristics are controlled for? There exists a large empirical literature providing an affirmative answer to this question. We argue that methodological problems with the empirical strategies employed in this literature leave the results open to diverse interpretations. In many cases, the indicators of openness' used by researchers are poor measures of trade barriers or are highly correlated with other sources of bad economic performance. In other cases, the methods used to ascertain the link between trade policy and growth have serious shortcomings. Papers that we review include Dollar (1992), Ben-David (1993), Sachs and Warner (1995), and Edwards (1998). We find little evidence that open trade policies--in the sense of lower tariff and non-tariff barriers to trade--are significantly associated with economic growth.
Keywords: trade policy; economic growth; cross-national evidence; openness
JEL Codes: F13; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower trade barriers (F19) | higher growth rates (O49) |
| trade restrictions (F14) | per capita GDP growth (O49) |
| trade policies (F13) | welfare (I38) |