Trade Policy in Developing Countries- Rodriquez and Rodrik

Trade Policy in Developing Countries- Rodriquez and Rodrik...

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Trade Policy in Developing Countries Rodriquez and Rodrik April 15, 2008 Two Major Points: o 1) What is the mechanism linking openness and growth? o 2) How can on separate out the effect of openness from other important correlated variables such as: Good domestic policies Rule of law, institutional quality Sub-Saharan Africa: low growth rates, lack of openness, bad macro policies RR are skeptical about general and unambiguous relationship between openness and growth Researches should focus on economic mechanisms through which policy changes might influence growth Issues of openness: low tariffs, good FDI environment Trade liberalization – a component of openness?
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Unformatted text preview: Simple measures of trade barriers tend not to enter significantly into well-specified growth equations o Simple trade weighted averages underweight high tariffs- restrict import flows o Tariffs and non-tariff barriers may be substitutes: Beef tariffs vs. SPS (mad cow) • Distinguishing the question: o Does trade policy liberalization result in faster growth one other relevant country characteristics are accounted for? OR o Does international trade raise growth rates of income • No empirical evidence that protection brings about economic growth- however doesn’t mean that openness always leads to growth • Difference between bound and applied rates...
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