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Triggering Economic Growth:Trade Liberalization as the Prominent Factor in Less-developed Countries

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  • Mohsen Mohaghegh
  • A. S. Valipour

Abstract

Numerous theoretical and empirical studies have investigated the role of financial development, human capital accumulation, and trade liberalization on economic growth. Their findings, however, have been inconclusive as to which of these factors' implementation should policy makers prioritize. We construct a panel of more than 160 'developed', 'developing' and 'less-developed' countries between 1965 and 2017 to address this issue. We use non-stationary dynamic panel estimations to argue that quantitative effects of these factors depend on national income levels. Even though developed countries benefit the most from investing in their human capital and developing countries gain more by improving their financial institutions, our results show that both financial development and human capital are relatively ineffective in less developed countries. Nonetheless, trade liberalization has a stronger impact on GDP growth in these economies than in developing and developed countries.

Suggested Citation

  • Mohsen Mohaghegh & A. S. Valipour, 2021. "Triggering Economic Growth:Trade Liberalization as the Prominent Factor in Less-developed Countries," Business and Economic Research, Macrothink Institute, vol. 11(2), pages 252-265, June.
    • Handle: RePEc:mth:ber888:v:11:y:2021:i:2:p:252-265
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    More about this item

    Keywords

    Economic growth; Trade liberalization; Human capital; Financial development; Non-stationary panels; Economic development;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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