The relationship between trade openness and economic growth is ambiguous from both theoretical and empirical point of view. The theoretical propositions reveal that while trade openness leads to a greater economic efficiency, market imperfections, differences in technology and endowments may lead to adverse effect of trade liberalisation on individual countries. In this chapter, we reexamine the empirical evidence pointing to the benefits of trade liberalisation and bring theoretical issues on possible adverse effect of openness to the fore. It has been argued that 'passive' trade liberalisation may not necessarily lead to positive economic outcomes, particularly in less advanced transition economies. Considering the empirical work on the matter, a lot of controversies are related to measurement issues. We find that openness measured by trade intensity indicators may lead to misleading conclusions about the trade growth nexus. Hence, the discussion of policy implications regarding the positive influence of trade barriers on economic growth goes well beyond the context of transition.
In this paper we employ econometric analysis to investigate the impact of FDI and the related externalities on economic growth in transition economies. We contribute to recent literature by using more reliable measure of FDI while also depicting the character of FDI and related knowledge spillovers, as well as by examining the importance of technological and innovative capabilities in explaining the growth performance among transition economies, not previously studied. Overall, the results of our empirical analysis seem to render support to the hypothesis that FDI contribute to economic growth predominantly through knowledge spillovers, and that the higher level of technological development proxied by government and business R&D expenditures is associated with better growth performance among transition economies. Essentially, by the way we measure FDI in this analysis (i.e. the share of FDI in the manufacturing gross value added) and in the view of the integrated framework in which we study the relationship between FDI and economic growth, allows us to stipulate that the positive impact of FDI on economic growth is associated with more knowledge-capability and efficiency-seeking FDI.
In this paper we investigate the impact of environmental taxes on CO2 emissions in the context of emerging market economies. An attempt has been made to identify what role environmental policy and specific tax policy measures play in understanding the relationship between economic development and environmental degradation. The empirical analysis covers ten Central and Eastern European countries in the period from 1995 to 2015. The latest data on environmental taxes are available only from 1995. We contribute to recent literature in two respects. First, we study this relationship within a dynamic framework in which we take into account the issues of serial correlation and endogeneity in the regressors due to the cointegration relationship. Specifically, we rely on the fully-modified least squares (FM-OLS) estimation technique to model the long-term relationship between income and carbon-dioxide emissions. Second, this paper advances our understanding on the effectiveness of tax policy measures in curbing CO2 emissions, on which we have scarce empirical evidence. The results of this analysis provide rather strong evidence in support of an inverted U-shaped relationship between economic growth and the environment. However, environmental taxes do not seem to be effective in modifying the behaviour of economic agents and in protecting the environment. The results are robust to different models.
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