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Institutions and Structural Unemployment: North-South Trade, Openness and Growth

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In models of endogenous growth, international trade can impact upon growth by allowing access to the innovative products of other countries. Since developing countries do little if any innovation, it is primarily through trade with developed countries that they profit from higher levels of technological development. In this paper we construct an empirical model to estimate trade flows from the North to the South. Using the results of this model we construct a measure of openess to Northern imports, based on the deviation of actual imports from that predicted by our model. We find that this measure of openness is significantly and robustly related to economic growth, suggesting that trade with advanced countries can facilitate growth through the absorption of advanced technology.

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  • Rod Falvey & Neil Foster & David Greenaway, 2001. "Institutions and Structural Unemployment: North-South Trade, Openness and Growth," Vienna Economics Papers vie0108, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie0108
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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
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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