Testing for Trade-Induced Investment-Led Growth / Richard E. Baldwin, Elena Seghezza.

Format:

Book

Author/Creator:

Baldwin, Richard E.

Contributor:

National Bureau of Economic Research.

Seghezza, Elena.

Series:

Working Paper Series (National Bureau of Economic Research) no. w5416.

NBER working paper series no. w5416

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Summary:

Many studies have found a positive correlation between trade and growth, but do not attempt to identify the economic mechanisms involved. This paper attempts to identify one of the mechanisms linking trade and growth. In particular, we present a novel theoretical model that establishes a link between trade liberalization and investment-led growth. Estimating equations are derived from the model and estimated with three stage least squares on a cross-country data sample. We find that domestic protection depresses investment and thereby slows growth. Foreign trade barriers also lower domestic investment, but the anti-investment effect is weaker and is less robust to sample and specification changes.

Notes:

Print version record

January 1996.