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Effects of international trade on income revisited

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  • Jiantao Ma

Abstract

This paper revisits the causal impact of international trade on income using a time‐variant instrument in a panel of counties between 1950 and 1995. In particular, in constructing the time‐varying instrument, it estimates the gravity model using the Poisson pseudo maximum likelihood (PPML) estimator. Trade has a significantly positive impact on income over the 1950–1970 period ‐the income elasticity of trade is between 0.35 and 0.50. However, air distance has not had any increasing effects on international trade since the 1970s. Therefore, the imputed trade from 1970 to 1995, used as an instrument, has little variance and should not have driven the change in income.

Suggested Citation

  • Jiantao Ma, 2023. "Effects of international trade on income revisited," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1286-1302, September.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:4:p:1286-1302
    DOI: 10.1111/roie.12667
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