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Testing the Linkages between Trade and Productivity Growth

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  • Claire Economidou
  • Antu Panini Murshid

Abstract

The authors examine the effect of trade on productivity growth using data from nine manufacturing industries across 12 OECD countries over the period 1978–97. Because causality between productivity growth and trade share runs both ways, geographical characteristics of countries are used to instrument for average bilateral trade volumes over the 20‐year period. In addition, to exploit the time‐series nature of the data, the authors construct a panel dataset and employ dynamic panel data techniques. After controlling for industry‐specific heterogeneity, the results indicate that increased exposure to trade, in particular higher import volumes, exerts a positive influence on industries' productivity growth. However, the effect is rather small.

Suggested Citation

  • Claire Economidou & Antu Panini Murshid, 2008. "Testing the Linkages between Trade and Productivity Growth," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 845-860, November.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:845-860
    DOI: 10.1111/j.1467-9361.2008.00457.x
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    References listed on IDEAS

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    1. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
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    4. Michelle P. Connolly, 1998. "The dual nature of trade: measuring its impact on imitation and growth," Staff Reports 44, Federal Reserve Bank of New York.
    5. Stefano Scarpetta & Thierry Tressel, 2002. "Productivity and Convergence in a Panel of OECD Industries: Do Regulations and Institutions Matter?," OECD Economics Department Working Papers 342, OECD Publishing.
    6. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2002. "The Global Impacts of Farm Policy Reforms in Organization for Economic Cooperation and Development Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 774-781.
    7. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, January.
    8. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
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    Cited by:

    1. Nasri Harb, 2009. "Oil Exports, Non‐Oil GDP, and Investment in the GCC Countries," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 695-708, November.
    2. Chaido Dritsaki & Pavlos Stamatiou, 2019. "Investigating the Impact of Market Openness on Economic Growth for Poland: An Autoregressive Distributed Lag Bounds Testing Approach to Cointegration," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 123-131.
    3. Imen Mohamed Sghaier, 2023. "Trade openness, financial development and economic growth in North African countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1729-1740, April.
    4. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    5. Joshua Aizenman & Mark M. Spiegel, 2010. "Takeoffs," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 177-196, May.
    6. Berhanu Abegaz & Arnab K. Basu, 2011. "The Elusive Productivity Effect of Trade Liberalization in the Manufacturing Industries of Emerging Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 5-27, January.
    7. Bergman, Karin, 2011. "Productivity Effects of Privately and Publicly Funded R&D," Working Papers 2011:28, Lund University, Department of Economics.
    8. Imen Mohamed Sghaier, 2020. "Does Financial Development Affect the Economic Growth Gains from Trade Openness?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 666-682, December.
    9. Jürgen Meckl & Benjamin Weigert, 2013. "Special Issue. Guest Editor: Zhihao Yu," Review of Development Economics, Wiley Blackwell, vol. 17(3), pages 549-558, August.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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