By Douglas A. Irwin.
Does Trade Reform Promote Economic Growth? A Review of Recent Evidence
53 Pages
Posted: 11 Jun 2019
Abstract
Do trade reforms that significantly reduce import barriers lead to
faster economic growth? In the two decades since RodrÃguez 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.
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