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What do we need besides trade?

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  • Yu Chen

Abstract

Trade has been shown by many authors to have strong positive impact on productivity. However, we also see some others being more reserved about such an impact. This study intends to investigate whether trade is enough for better economic performance, or rather, whether the impact of trade depends on the quality of local institutions. Using a panel of China's provincial data, empirical estimation results show that the better the quality of local institutions, the stronger the positive impact of trade on total factor productivity. If local institutions did not reach a certain quality level, trade expansion could have a negative marginal effect on total factor productivity.

Suggested Citation

  • Yu Chen, 2009. "What do we need besides trade?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 7(1), pages 17-30.
    • Handle: RePEc:taf:jocebs:v:7:y:2009:i:1:p:17-30
    DOI: 10.1080/14765280802604680
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    References listed on IDEAS

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    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1.
    3. Zvi Griliches, 1984. "Introduction to "R & D, Patents, and Productivity"," NBER Chapters, in: R&D, Patents, and Productivity, pages 1-20, National Bureau of Economic Research, Inc.
    4. Mr. Arvind Subramanian & Mr. Francesco Trebbi & Mr. Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 2002/189, International Monetary Fund.
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