Outward-oriented Trade Policies Research Articles

Growth Breaks and Growth Spells in Sub-Saharan Africa

This paper examines the growth performance of sub-Saharan African countries since 1960 through the lens of growth turning points (accelerations and decelerations) and periods of sustained growth (growth spells). Growth accelerations are generally associated with improved external conditions, increased investment and trade openness, declines in inflation, better fiscal balances, and improvements in the institutional environment. Transitioning from growth accelerations to growth spells often requires additional efforts beyond what is needed to trigger an acceleration. Growth spells are sustained by fiscal policy that prevents excessive public debt accumulation, monetary policy geared toward low inflation, outward-oriented trade policies, and structural policies that reduce market distortions, as well as supportive external environment and improvements in democratic institutions. Overall, determinants of growth spells in sub-Saharan Africa are different from those in the rest of the emerging and developing countries.

Export-led-growth Hypothesis: Further Econometrics Evidence from India

Over the last three decades the role of export in the process of economic growth has been the subject of debate among economists. The recent policy of liberalization, privatization and globalization and growth process of developed and developing countries further helped fuel this debate. The main questions in this debate are whether an outward oriented trade policy is preferable to an inward oriented trade policy in stimulating economic growth. There are two types of hypothesis that are build up in this debate: Export-led Growth (ELG) hypothesis and Growth-led Export (GLE) hypothesis. This paper investigates the relationship between GDP and exports in India for the period of 1980–2009. To achieve the objective of this study, Granger Causality Test has been applied. The test results support that there is bilateral causality between GDP and exports. This study suggests that export promotion policy is pursued consistently with an emphasis on inclusive and sustainable growth. This study supports the view that export is an engine of growth.

The choice of trade regime: delayed reform under productivity fluctuations and cost of structural change

Despite the advantages of international trade, a number of countries have stuck to restricted trade regimes, allowing the productivity gap between themselves and the “trading” world to become huge before turning to a more outward oriented trade policy. As a supplement to the existing explanations for the hesitation to change trade regime, we present a model where the international productivity development shared by open economies, is uncertain. Due to uncertainty, it might be optimal to wait and maybe exercise the option to change trade regime later, i.e. to delay a trade reform.

Trade policy, export expansion, human capital and growth

This paper empirically investigates the impact of trade policy on export expansion and on GDP growth in developing countries while controlling for the human capital stock and the initial level of development. By using a simultaneous system estimation we unite the approach found in the export expansion and growth literature with the approach found in papers that estimate the effect of trade policy on growth, while also making several improvements in the estimation of the underlying relationships. The results obtained from our estimation are more credible because of these improvements and therefore have stronger policy implications. We find that outward-oriented trade policies substantially and significantly impact growth in developing countries not only by directly enhancing exports but also through a feedback (or multiplier) effect.

Pollution intensity of GDP and trade policy: Can the World Bank be wrong?

What are the environmental implications of open trade policies in developing countries? Economic theory and environmental critics suggest they worsen environmental quality. This conventional wisdom has been challenged by several studies which suggest that outward-oriented trade policies are likely to be “win-win” (enhance economic growth and environmental quality). This paper challenges revised conventional wisdom (RCW) by demonstrating that developing countries with outward-oriented trade policies have higher pollution intensities of GDP than those following inward-oriented policies. The paper examines why the evidence reported here differs so sharply from RCW studies, considers the policy implications of these results, and identifies reasons why, despite them, it may not make sense to totally discount future potential win-win opportunities

Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach

Recent empirical studies have examined the determinants of economic growth using country-average (cross-sectional) data. By contrast, this paper employs a technique for using a panel of cross-sectional and time series data for 98 countries over the 1960-85 period to determine the quantitative importance for economic growth of both country-specific and time-varying factors such as human capital, public investment, and outward-oriented trade policies. The empirical results support the view that these factors exert a positive and significant influence on growth. They also provide estimates of the speed at which the gap between the real per capita incomes of rich and poor countries is likely to be reduced over the longer term.

Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach

Several recent empirical studies have examined determinants of economic growth using country average (cross-section) data. In contrast, this paper employs a technique for using a panel of both cross-section and time-series data for 98 industrial and developing countries over 1960-85 to determine the quantitative importance for economic growth of both country-specific and time-varying factors such as human capital, public investment, and outward-oriented trade policies. The empirical results provide support for the view that these factors exert a positive and significant influence on economic growth. They also provide estimates of the speed at which the gap in real per capita income between rich and poor countries is likely to be reduced over the longer term.

TRADE POLICY AND PRODUCTIVITY GAINS IN DEVELOPING COUNTRIES

Despite the widely accepted view that liberal, outward-oriented trade policies are superior to restrictive, inward-oriented policies, doubts about liberalization remain strong in many circles. One reason for such doubt is the dearth of research quantifying the large gains that liberal trade policies are said to generate. The survey of the literature undertaken for this article was a review of the evidence on the link between trade policy and efficiency, or productivity, gains in developing countries. Does the literature support the view that more open trade policies bring greater efficiency? Several inferences are drawn from the literature on sources of growth—particularly with regard to increases in capacity utilization and economies of scale. The article also examines evidence from the few studies that explicitly try to correlate efficiency gains directly with trade policy. These studies fall into three categories: those that evaluate the effect of trade policy on market power or degree of competition; those that measure total factor productivity or technical efficiency gains and correlate these with the degree of protection; and those that estimate the aggregate effects of changes in trade policy on welfare (mainly with computable general equilibrium models, which measure dynamic efficiency gains from trade). In a final section, the article pulls together the findings from the indirect and direct evidence as a basis for suggesting a number of hypotheses on the link between efficiency and trade policy. One conclusion is that country-specific analysis over time appears to be superior to cross-country comparisons.