The impact of trade on economic growth

Leitão, Nuno Carlos (2012): The impact of trade on economic growth.

Abstract

The purpose of this article is to investigate the impact of marginal intra-industry trade on economic growth. The manuscript questions the economic growth exogenous models. It introduces new proxies to explain the economic growth as in marginal intra-industry trade, foreign direct investment and globalization index. The results indicate that economic growth is a dynamic process. The change of intra-industry has a positive impact on economic growth. This paper confirms relevant theoretical hypothesis as foreign direct investment and globalization promote the economic growth. The good results obtained with GMM system estimator suggest that the building of dynamic theoretical models will be of interest to academic researchers the link between marginal intra-industry trade and economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous models, Panel Data, and United States
• Subjects: N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models

References

Arellano, M. and Bond, S. (1991), Some Test of Specification for Panel Data: Monte Carlo Evidence and An Application to Employment Equations, Review of Economic Studies , vol. 58, pp.277-297.

Arellano, M. and Bover, O. (1995), Another Look at Instrumental Variable Estimation of Error- Components Models’, Journal of Econometrics, vol. 68,pp. 29-51.

Aghion, P. and Howitt, P. (1992), A model of growth through creative destruction, Econometrica, vol. 60, pp. 323-351.

Alesina, A., Grilli, V and Milesi-Ferretti, G. M. (1994),The political economy of capital controls, in Capital Mobility: The Impact on Consumption, Investment and Growth, (Eds) L. Leiderman and A. Razin, Cambridge University Press, Cambridge ,pp.289–321.

Ayanwale AB (2007): FDI and economic Growth: Evidence from Nigeria. African Economic Research Consortium Paper 165. Nairobi.

Badinger, H. and G. Tondl. (2002): Trade, Human Capital and Innovation: The Engines of European Regional Growth in the 1990s. ERSA conference papers No. ERSA02P043.

Barro, R. (1991): Economic growth in a cross section of countries. Quarterly Journal of Economics, 100 (2), pp. 223-251.

Blundell, R and Bond, S. (1998), Initial Conditions and Moment Restrictions in Dynamic Panel Data Models, Journal of Econometrics Review, vol. 87, 115:143.

Blundell, R and Bond, S. (2000), GMM Estimation with Persistent Panel Data: An Application to Production Functions, Econometrics Review, vol. 19, pp.321-340.

Brülhart, M. (1994). “Marginal Intra-Industry Trade: Measurement and Relevance for the Pattern of Industrial Adjustment, Weltwirtschaftliches Archiv 130(3), pp. 600–613.

Campos, N. F. and Y. Kinoshita (2002): Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies. In: Manchester School 70(3),pp. 398–419.

Damijan, J. P. and M. Rojec. (2007): Foreign Direct Investment and Catching Up of New EU Member States: Is There a Flying Geese Pattern?. Applied economics Quarterly ,53(2), pp. 91–118.

De Mello L R (1999): Foreign Direct Investment – Led Growth: Evidence from Time Series and Panel Data. Oxford Economic Papers, 51, pp. 133–151.

Dreher, A. (2006): Does globalization affects growth? Evidence from new index of globalization . Applied Economics, 38, pp.1091-1110.

Dreher, A. and N. Gaston (2008): Has Globalization Increased Inequality ?. Review of International Economics, 16, pp. 516-536

Dollar, D. (1992): Outward-oriented developing economies really do grow more rapidly: evidence from 95 LDCs, 1976–85. Economic Development and Cultural Change, 40: 523–4.

Frankel, J. A. and Romer, D. (1996): Trade and growth: an empirical investigation. NBER Working Paper 5476.

Grossman, G. and Helpman, E. (1991), 'Quality ladders in the theory of growth, Review of Economic Studies, vol. 58, pp. 43-61.

Grubel, H. and Lloyd, P.(1975). “Intra industry trade: the theory and measurement of international trade in different products”, London: Macmillan.

Hamilton, C. and Kniest, P. (1991), Trade Liberalisation, Structural Adjustment and Intra-Industry Trade: A Note, Weltwirtschaftliches Archiv, 127, 356-67.

Kai H. and i Hamori S, (2009), Globalization, financial depth, and inequality in Sub-Saharan Africa, Economics Bulletin, vol 29 no.3,pp. 2025-2037.

Leitão, N.C. (2011), Tourism and economic growth: a panel data approach, Actual Problems of Economics vol.9,pp. 343-349.

Lucas, R. (1988), On the mechanics of economic development, Journal of Monetary Economics, vol. 22,pp. 3-42.

Mileva, E. (2008): The Impact of Capital Flows on Domestic Investment in Transition Economies. ECB Working Paper 871. February.

Onaran, Ö. (2007): Jobless growth in the Central and Eastern European Countries: A country specific panel data analysis for the manufacturing industry. Vienna University of Economics and Business Administration. Working Paper 103. March.

Rebelo, S. (1991), Long-Run Policy Analysis and Long-Run Growth, Journal of Political Economy, University of Chicago Press, vol. 99(3), pp. 500-521, June.

Rodrik, D. (1998): Who needs capital account convertibility?, in Should the IMF Pursue Capital Account Convertibility?, Essays in International Finance 207 (Eds)

S. Fischer, R. N. Cooper, R. Dornbusch, P. M. Garber, C. Massad, J. J. Polak, D. Rodrick and S. S. Tarapore, Department of Economics, Princeton University, Princeton, NJ, pp. 55–65

Romer, P. (1986), Increasing returns and long run growth, Journal of Political Economy, vol. 98, nº. 5,pp.71-102. Schumpeter, J.A. (1942), Capitalism, Socialism and Democracy, New York: Harper and Row.

Solow, R. (1956), A contribution to the theory of economic growth, Quarterly Journal of Economics, vol. 70,pp. 65-94.

Windmeiger, F. (2005), A finite sample correction for the variance of linear efficient two-step GMM estimators, Journal of Econometrics, vol. 26,pp. 25-51