Trade Liberalization and Growth: New Evidence

89 Pages Posted: 23 Nov 2003

See all articles by Romain T. Wacziarg

Romain T. Wacziarg

UCLA Anderson School of Management; National Bureau of Economic Research (NBER)

Karen Horn Welch

Stanford University - Freeman Spogli Institute for International Studies

Multiple version iconThere are 3 versions of this paper

Date Written: November 2003

Abstract

This paper revisits the empirical evidence on the relationship between economic integration and economic growth. First, we present an updated dataset of openness indicators and trade liberalization dates for a wide cross-section of countries in the 1990s. Second, we extend the Sachs and Warner (1995) study of the relationship between trade openness and economic growth to the 1990s, discussing recent criticisms of their measurement and estimation framework. Our results suggest that the cross-sectional findings of Sachs and Warner are sensitive to the period under consideration. In particular, an updated version of their dichotomous trade policy openness indicator does not enter significantly in growth regressions for the 1990s. Third, and most importantly, we present new evidence on the time paths of economic growth, physical capital investment and openness around episodes of trade policy liberalization. In sharp contrast to our cross-sectional results, we find that liberalization has, on average, robust positive effects on growth, openness and investment rates within countries. We illustrate these large sample findings with detailed case studies in a subsample of representative countries.

Keywords: Trade liberalization, growth

JEL Classification: F1, F4, O4

Suggested Citation

Wacziarg, Romain T. and Horn Welch, Karen, Trade Liberalization and Growth: New Evidence (November 2003). Available at SSRN: https://ssrn.com/abstract=471941 or http://dx.doi.org/10.2139/ssrn.471941

Romain T. Wacziarg (Contact Author)

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Karen Horn Welch

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

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