Trade, regulations, and growth, Vol. 1 of 1

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Trade, regulations, and growth

Author:	Bolaky, Bineswaree; Freund, Caroline;	Collection Title:	Policy, Research working paper ; no. WPS 3255
Country:	World;	Date Stored:	2004/04/20
Document Date:	2004/04/01	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	Industry and trade
Region:	The World Region	Report Number:	WPS3255
Sub Sectors:	General industry and trade sector	SubTopics:	Environmental Economics & Policies; Governance Indicators; Achieving Shared Growth; Payment Systems & Infrastructure; Economic Theory & Research; Free Trade; Health Monitoring & Evaluation; Public Health Promotion
Volume No:	1 of 1

Summary: Trade does not stimulate growth in economies with excessive business and labor regulations. The authors examine the effect of openness on growth using cross-country regressions in both levels and changes. Results from the levels regressions imply that increased openness is associated with a lower standard of living in heavily-regulated economies. Growth regressions confirm that the effect of increased trade on growth is absent in these countries. The authors also find that once they control for the effect of trade on growth in heavily regulated economies, the evidence that trade positively affects growth is stronger than has been found in previous studies. Excessive regulations restrict growth because resources are prevented from moving into the most productive sectors and to the most efficient firms following liberalization. In addition, in highly regulated economies, increased trade is more likely to occur in the wrong goods-that is, goods where comparative advantage does not lie. The results imply that countries must create a sound business environment before trade can be used as an engine of growth.


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File Type		Description	File Size (mb)

	PDF 40 pages	Official version*	2.8 (approx.)
	Text	Text version**


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	PDF 40 pages	WPS3255	0.16

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