Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?

New trade theory versus old trade policy: a continuing enigma

“…But for a comprehensive empirical overview, see Miranda et al (1998). 13 See Greenaway et al (1998) for a discussion. Note that the problems in measuring openness are recognised theoretically by the wish to construct sensible indices, as in the notion of a uniform-tariff welfare-equivalent to any existing level of protection.…”

“…In general many of these studies suggest that the effects of liberalisation on growth are ambiguous and complex; whilst some groups of countries show an improvement in growth (as well as other indicators such as investment), others show a marked deterioration. More recent attempts to provide a more consistent analysis using panel data and alternative measures of liberalisation suggest a J-curve type effect of liberalisation on per capita GDP growth (Greenaway et al 1998). Here again, however, the alternative models provide very different estimates of the long-run 11 effects on growth (with the pay-off ranging from 2% to 46% !…”

“…Even so, it is far from supportive of the trade liberalisation hypothesis. Neatly illustrating some of these observations is the study of Greenaway et al (1998) who panel data across liberalisers and non-liberalisers (with/without and before/after) to come to a negative conclusion on the effect of trade reform on growth but then suggest this may be due to a shorter-run J-curve impact.…”

Globalization, Growth, Inequality, and Poverty in Africa: A Macroeconomic Perspective

“…Relative growth performance of Africa compared with other regions is shown in the lower panel of The link between trade and growth has been examined by many authors, most prominently recently by Frankel and Romer (1999), Dollar and Kraay (2002) and Rodriguez and Rodrik (1999), Greenaway, Morgan and Wright (1998), and with the literature usefully reviewed in an Africa context by Hammouda (2004). Whether there is a causal link, or a correlation that is controlled by other factors, is still a matter of some controversy.…”

“…Interestingly, after controlling for geography and income, Frankel and Romer (1999) find no additional distinguishing factors for SSA. Greenaway, Morgan and Wright (1998) provide a panel analysis of trade reforms and growth, based on data for 73 countries, worldwide. Again, they find strong evidence of trade reform-induced effect on growth.…”