Trade, Regulations, and Growth

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 t...

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Main Authors:	Bolaky, Bineswaree, Freund, Caroline
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ABSOLUTE VALUE AVERAGE GROWTH AVERAGE TRADE BARRIERS TO ENTRY BILATERAL TRADE BILATERAL TRADE DATA BLACK MARKET BLACK MARKET PREMIUM BUSINESS CLIMATE BUSINESS ENVIRONMENT BUSINESS SECTOR COMPARATIVE ADVANTAGE CONSUMERS CORRUPTION COUNTRY REGRESSIONS CPI CRIME CURRENCY DEPENDENT VARIABLE DEREGULATION DEVELOPING COUNTRIES DOMESTIC DEMAND ECONOMIC ACTIVITY ECONOMIC GROWTH ELASTICITY ELASTICITY OF TRADE EMPLOYMENT ENDOGENOUS VARIABLES ENFORCEABILITY ESTIMATION RESULTS EXCHANGE RATE EXOGENOUS VARIABLES EXPLANATORY VARIABLES EXPORT MARKETS EXPORTS FOREIGN COMPETITION FOREIGN INVESTORS GDP GDP DEFLATOR GDP PER CAPITA GRAVITY MODEL GROWTH PERFORMANCE GROWTH RATES GROWTH REGRESSIONS HIGH ENTRY HIGH INCOME COUNTRIES IMPORT COMPETITION IMPORTS INCOME INCOME GROUPS INCOME GROWTH INCOME LEVELS INCREASE GROWTH INDEPENDENT VARIABLE INDUSTRIALIZED COUNTRIES INFLATION INFLATION RATE INSTITUTIONAL ENVIRONMENT INSTITUTIONAL MEASURES INSTITUTIONAL QUALITY INSTITUTIONAL REFORM INVESTMENT RATIO LABOR FORCE LABOR MARKET LAGGED GROWTH LANDLOCKED COUNTRIES LAW INDEX LEGAL ORIGIN LONG RUN LONG-RUN GROWTH MACRO STABILITY MARKET SIZE 0 HYPOTHESIS OPENNESS PER CAPITA INCOME PER CAPITA INCOMES PER-CAPITA INCOME POLITICAL INSTABILITY POSITIVE EFFECTS PRIVATE GOODS PRODUCERS PRODUCTION PATTERNS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS REAL GDP REAL INCOME REAL INCOMES REGRESSION ANALYSIS REGULATORY BURDEN REGULATORY REGIME RULE OF LAW SIGNIFICANT EFFECT SPECIALIZATION STANDARD DEVIATION STRUCTURAL CHANGE TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS TRADE DATA TRADE LIBERALIZATION TRADE OPENNESS TRADE PARTNERS TRADE REFORM TRANSITION ECONOMIES UNEMPLOYMENT UNOFFICIAL ECONOMY
Online Access:	http://documents.worldbank.org/curated/en/2004/04/3211227/trade-regulations-growth http://hdl.handle.net/10986/13889

id	okr-10986-13889
recordtype	oai_dc
spelling	okr-10986-138892021-04-23T14:03:20Z Trade, Regulations, and Growth Bolaky, Bineswaree Freund, Caroline ABSOLUTE VALUE AVERAGE GROWTH AVERAGE TRADE BARRIERS TO ENTRY BILATERAL TRADE BILATERAL TRADE DATA BLACK MARKET BLACK MARKET PREMIUM BUSINESS CLIMATE BUSINESS ENVIRONMENT BUSINESS SECTOR COMPARATIVE ADVANTAGE CONSUMERS CORRUPTION COUNTRY REGRESSIONS CPI CRIME CURRENCY DEPENDENT VARIABLE DEREGULATION DEVELOPING COUNTRIES DOMESTIC DEMAND ECONOMIC ACTIVITY ECONOMIC GROWTH ELASTICITY ELASTICITY OF TRADE EMPLOYMENT ENDOGENOUS VARIABLES ENFORCEABILITY ESTIMATION RESULTS EXCHANGE RATE EXOGENOUS VARIABLES EXPLANATORY VARIABLES EXPORT MARKETS EXPORTS FOREIGN COMPETITION FOREIGN INVESTORS GDP GDP DEFLATOR GDP PER CAPITA GRAVITY MODEL GROWTH PERFORMANCE GROWTH RATES GROWTH REGRESSIONS HIGH ENTRY HIGH INCOME COUNTRIES IMPORT COMPETITION IMPORTS INCOME INCOME GROUPS INCOME GROWTH INCOME LEVELS INCREASE GROWTH INDEPENDENT VARIABLE INDUSTRIALIZED COUNTRIES INFLATION INFLATION RATE INSTITUTIONAL ENVIRONMENT INSTITUTIONAL MEASURES INSTITUTIONAL QUALITY INSTITUTIONAL REFORM INVESTMENT RATIO LABOR FORCE LABOR MARKET LAGGED GROWTH LANDLOCKED COUNTRIES LAW INDEX LEGAL ORIGIN LONG RUN LONG-RUN GROWTH MACRO STABILITY MARKET SIZE 0 HYPOTHESIS OPENNESS PER CAPITA INCOME PER CAPITA INCOMES PER-CAPITA INCOME POLITICAL INSTABILITY POSITIVE EFFECTS PRIVATE GOODS PRODUCERS PRODUCTION PATTERNS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS REAL GDP REAL INCOME REAL INCOMES REGRESSION ANALYSIS REGULATORY BURDEN REGULATORY REGIME RULE OF LAW SIGNIFICANT EFFECT SPECIALIZATION STANDARD DEVIATION STRUCTURAL CHANGE TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS TRADE DATA TRADE LIBERALIZATION TRADE OPENNESS TRADE PARTNERS TRADE REFORM TRANSITION ECONOMIES UNEMPLOYMENT UNOFFICIAL ECONOMY 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. 2013-06-12T22:56:21Z 2013-06-12T22:56:21Z 2004-03 http://documents.worldbank.org/curated/en/2004/04/3211227/trade-regulations-growth http://hdl.handle.net/10986/13889 English en_US Policy Research Working Paper;No. 3255 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ABSOLUTE VALUE AVERAGE GROWTH AVERAGE TRADE BARRIERS TO ENTRY BILATERAL TRADE BILATERAL TRADE DATA BLACK MARKET BLACK MARKET PREMIUM BUSINESS CLIMATE BUSINESS ENVIRONMENT BUSINESS SECTOR COMPARATIVE ADVANTAGE CONSUMERS CORRUPTION COUNTRY REGRESSIONS CPI CRIME CURRENCY DEPENDENT VARIABLE DEREGULATION DEVELOPING COUNTRIES DOMESTIC DEMAND ECONOMIC ACTIVITY ECONOMIC GROWTH ELASTICITY ELASTICITY OF TRADE EMPLOYMENT ENDOGENOUS VARIABLES ENFORCEABILITY ESTIMATION RESULTS EXCHANGE RATE EXOGENOUS VARIABLES EXPLANATORY VARIABLES EXPORT MARKETS EXPORTS FOREIGN COMPETITION FOREIGN INVESTORS GDP GDP DEFLATOR GDP PER CAPITA GRAVITY MODEL GROWTH PERFORMANCE GROWTH RATES GROWTH REGRESSIONS HIGH ENTRY HIGH INCOME COUNTRIES IMPORT COMPETITION IMPORTS INCOME INCOME GROUPS INCOME GROWTH INCOME LEVELS INCREASE GROWTH INDEPENDENT VARIABLE INDUSTRIALIZED COUNTRIES INFLATION INFLATION RATE INSTITUTIONAL ENVIRONMENT INSTITUTIONAL MEASURES INSTITUTIONAL QUALITY INSTITUTIONAL REFORM INVESTMENT RATIO LABOR FORCE LABOR MARKET LAGGED GROWTH LANDLOCKED COUNTRIES LAW INDEX LEGAL ORIGIN LONG RUN LONG-RUN GROWTH MACRO STABILITY MARKET SIZE 0 HYPOTHESIS OPENNESS PER CAPITA INCOME PER CAPITA INCOMES PER-CAPITA INCOME POLITICAL INSTABILITY POSITIVE EFFECTS PRIVATE GOODS PRODUCERS PRODUCTION PATTERNS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS REAL GDP REAL INCOME REAL INCOMES REGRESSION ANALYSIS REGULATORY BURDEN REGULATORY REGIME RULE OF LAW SIGNIFICANT EFFECT SPECIALIZATION STANDARD DEVIATION STRUCTURAL CHANGE TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS TRADE DATA TRADE LIBERALIZATION TRADE OPENNESS TRADE PARTNERS TRADE REFORM TRANSITION ECONOMIES UNEMPLOYMENT UNOFFICIAL ECONOMY
spellingShingle	ABSOLUTE VALUE AVERAGE GROWTH AVERAGE TRADE BARRIERS TO ENTRY BILATERAL TRADE BILATERAL TRADE DATA BLACK MARKET BLACK MARKET PREMIUM BUSINESS CLIMATE BUSINESS ENVIRONMENT BUSINESS SECTOR COMPARATIVE ADVANTAGE CONSUMERS CORRUPTION COUNTRY REGRESSIONS CPI CRIME CURRENCY DEPENDENT VARIABLE DEREGULATION DEVELOPING COUNTRIES DOMESTIC DEMAND ECONOMIC ACTIVITY ECONOMIC GROWTH ELASTICITY ELASTICITY OF TRADE EMPLOYMENT ENDOGENOUS VARIABLES ENFORCEABILITY ESTIMATION RESULTS EXCHANGE RATE EXOGENOUS VARIABLES EXPLANATORY VARIABLES EXPORT MARKETS EXPORTS FOREIGN COMPETITION FOREIGN INVESTORS GDP GDP DEFLATOR GDP PER CAPITA GRAVITY MODEL GROWTH PERFORMANCE GROWTH RATES GROWTH REGRESSIONS HIGH ENTRY HIGH INCOME COUNTRIES IMPORT COMPETITION IMPORTS INCOME INCOME GROUPS INCOME GROWTH INCOME LEVELS INCREASE GROWTH INDEPENDENT VARIABLE INDUSTRIALIZED COUNTRIES INFLATION INFLATION RATE INSTITUTIONAL ENVIRONMENT INSTITUTIONAL MEASURES INSTITUTIONAL QUALITY INSTITUTIONAL REFORM INVESTMENT RATIO LABOR FORCE LABOR MARKET LAGGED GROWTH LANDLOCKED COUNTRIES LAW INDEX LEGAL ORIGIN LONG RUN LONG-RUN GROWTH MACRO STABILITY MARKET SIZE 0 HYPOTHESIS OPENNESS PER CAPITA INCOME PER CAPITA INCOMES PER-CAPITA INCOME POLITICAL INSTABILITY POSITIVE EFFECTS PRIVATE GOODS PRODUCERS PRODUCTION PATTERNS PRODUCTIVITY PRODUCTIVITY GROWTH PROPERTY RIGHTS REAL GDP REAL INCOME REAL INCOMES REGRESSION ANALYSIS REGULATORY BURDEN REGULATORY REGIME RULE OF LAW SIGNIFICANT EFFECT SPECIALIZATION STANDARD DEVIATION STRUCTURAL CHANGE TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS TRADE DATA TRADE LIBERALIZATION TRADE OPENNESS TRADE PARTNERS TRADE REFORM TRANSITION ECONOMIES UNEMPLOYMENT UNOFFICIAL ECONOMY Bolaky, Bineswaree Freund, Caroline Trade, Regulations, and Growth
relation	Policy Research Working Paper;No. 3255
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Bolaky, Bineswaree Freund, Caroline
author_facet	Bolaky, Bineswaree Freund, Caroline
author_sort	Bolaky, Bineswaree
title	Trade, Regulations, and Growth
title_short	Trade, Regulations, and Growth
title_full	Trade, Regulations, and Growth
title_fullStr	Trade, Regulations, and Growth
title_full_unstemmed	Trade, Regulations, and Growth
title_sort	trade, regulations, and growth
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2004/04/3211227/trade-regulations-growth http://hdl.handle.net/10986/13889
_version_	1764430005370093568

Trade, Regulations, and Growth

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