Trade Causes Growth in Sub-Saharan Africa
In the 1990s the mainstream consensus was that trade causes growth. Subsequent research shed doubt on the consensus view, as evidence suggested that the identification of the effect of trade on growth was problematic in the existing literature. Thi...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/03/15959535/trade-causes-growth-sub-saharan-africa http://hdl.handle.net/10986/19874 |
| Summary: | In the 1990s the mainstream consensus
was that trade causes growth. Subsequent research shed doubt
on the consensus view, as evidence suggested that the
identification of the effect of trade on growth was
problematic in the existing literature. This paper
contributes to this debate by focusing on growth in
Sub-Saharan Africa. It estimates the effect of openness to
international trade on economic growth with panel data.
Employing instrumental variables techniques that correct for
endogeneity bias, the empirical evidence suggests that
within-country variations in trade openness cause economic
growth: a 1 percentage point increase in the ratio of trade
over gross domestic product is associated with a short-run
increase in growth of approximately 0.5 percent per year;
the long-run effect is larger, reaching about 0.8 percent
after ten years. These results are robust to controlling for
country and time fixed effects as well as political institutions. |
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