Trade Liberalization Effects on Economic Growth, 1980-2022

Abstract

The orthodox view of the effect of trade on GDP per capita assumes greater growth and equity, the heterodox theory refutes the argument and predicts inequitable and divergent results between countries. We resume the discussion using information from 1980 to 2022 in 102 countries, applying a panel data methodology and slope disaggregation. The goal is to test whether trade has adverse effects in lower-income countries and how the effect has changed over time. The results show that trade negatively affects GDP per capita growth mainly through imports, this tends to worsen over time and the impact is greater in poor countries. The main implication is the growing income divergence between nations; the recommendation is that governments and multilateral organizations continue to explore ways to balance and socialize trade. It is concluded that heterodox postulates, such as the vision of Thirlwall on trade, continue to be valid. The originality of the document lies in the disaggregation of results by countries and time blocks, as well as exports and imports.