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The Long-Run Effects of Tradeon Income and Income Growth
Author: Mr. Allan D. Brunner
Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 037
Language:
English
Publication Date:
01 Feb 2003
DOI:
https://doi.org/10.5089/9781451845594.001
ISBN:
9781451845594
ISSN:
1018-5941
Pages:
39
Keywords:
WP; panel data model; trade liberalization; economic growth; economic development; trade share; income growth; trade openness; trade-output relationship; constructed trade instrument; instrument specification; effects of trade; Personal income; Plurilateral trade; Agroindustries; Estimation techniques; North America; Africa; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines the dynamic relationship between trade and income. While most economists agree that increased trade leads to an increase in average income, economic theory is ambiguous about the possible effects on the long-run growth rate of the economy. Using a dynamic panel data model, the hypotheses of no long-run effects of trade on income and on income growth are tested explicitly. The possibility of endogeneity is addressed by constructing an instrument for trade by extending Frankel and Romer's (1999) cross-sectional approach to the case of a panel data model. The empirical results indicate that trade has a large and significant effect on the level of income, but the effect on income growth is small and non-robust to model specification.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund