Trade, growth and income

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26 Citations (Scopus)

Abstract

This paper uses the instrumental variable threshold regressions approach of Caner and Hansen (2004) to investigate whether the trade's contribution to the standard of living and long-run economic growth varies according to the level of economic development. The empirical evidence shows that greater trade openness has strongly beneficial effects on growth and real income for the developed countries but significantly negative effects for the developing countries. The heterogeneity in the relationships suggests that greater international trade and integration may foster uneven development and hence contribute to more diverging economies. In addition, the link of trade to economic performance is found to work through both capital accumulation and productivity growth channels. Finally, the evidence shows that real effects of trade also depend on the level of financial development, inflation and trade openness.

Original languageEnglish
Pages (from-to)677-709
Number of pages33
JournalJournal of International Trade and Economic Development
Volume20
Issue number5
DOIs
Publication statusPublished - 2011 Oct 1
Externally publishedYes

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Keywords

  • Economic development
  • Economic growth
  • Instrumental variables
  • Threshold regression
  • Trade openness

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Aerospace Engineering

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