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Tuesday
Nov182008

Does trade liberalization promote economic growth?

Trade liberalization definitely and reliably promotes economic growth, according to widely and fervently-held belief. But what have been the actual measurable effects of trade liberalization in the real world? Dani Rodrik summarizes two recent papers that find it depends on what tariffs were protecting. For example, tariffs protecting agriculture were negatively correlated with growth, but tariffs protecting industry were positively correlated with growth. The other paper finds that tariffs on capital goods and intermediate goods are correlated with slower growth, but tariffs on consumer goods have little effect on growth.

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