Does trade liberalization promote economic growth?
Tuesday, November 18, 2008 at 11:15AM
Skeptic in Economics, Free trade, Globalization

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.

Update on Wednesday, November 19, 2008 at 10:09PM by Registered CommenterSkeptic

Dani Rodrik summarizes other research searching for, but failing to find, evidence that financial liberalization is beneficial to developing nations and refers to several prominant situations in which Asian nations had spectacular growth despite rejection of financial liberalization.  He asks why developing nations adopt the financial principles recommended by the G-7 in the absence of evidence of benefit.  His answer: Ideology and zeitgeist.

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