Trade and Economic Growth : Evidence on the Role of Complementarities for CAFTA-DR Countries

This paper examines the effects of trade on growth among Central America-Dominican Republic Free Trade Agreement countries. To accomplish this task, the authors collected a panel data set of 136 countries over 1960-2010, and estimated cross-country growth regressions using an econometric methodology that accounts for unobserved effects and the likely endogeneity of the growth determinants. Following recent empirical efforts, they tested whether the impact of trade openness on growth may be more effective after surpassing a "minimum threshold" in specific areas closely related to economic development. The analysis finds not only that there is a robust causal link from trade to growth, but also that the growth benefits from trade are larger in countries with higher levels of education and innovation, deeper financial markets, a stronger institutional framework, more developed infrastructure networks, a high level of integration with world capital markets, and less stringent economic regulations. On average, rising trade has benefited growth in Central America-Dominican Republic Free Trade Agreement countries. However, the lack of progress in structural reforms has not allowed these countries to maximize the potential benefits from trade.

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Bibliographic Details
Main Authors: Calderón, César, Poggioa, Virginia
Language:English
Published: 2010-09-01
Subjects:ADVERSE EFFECT, ADVERSE EFFECTS, AGGREGATE LEVEL, AGGREGATE VOLATILITY, AGRICULTURAL PRODUCTIVITY, ANNUAL GROWTH, ANNUAL GROWTH RATE, ASSETS, BENCHMARK, BOND, BUSINESS OPPORTUNITIES, CAPITAL GOODS, CAPITAL INVESTMENT, CAPITAL MARKETS, CENTRAL BANK, CHANGES IN TRADE, COEFFICIENT ESTIMATE, COMPARATIVE ADVANTAGE, COMPARATIVE ADVANTAGES, CONDITIONAL CONVERGENCE, CONSUMER GOODS, COUNTRY CHARACTERISTICS, COUNTRY SPECIFIC, CROSS COUNTRY, CURRENCY, DEBT, DEBT INSTRUMENTS, DEBT TO EQUITY RATIOS, DEMAND ELASTICITIES, DEMOCRATIC ACCOUNTABILITY, DEPENDENT VARIABLE, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT INDICATORS, DEVELOPMENT REPORT, DIMINISHING RETURNS, DOMESTIC CREDIT, DOMESTIC PRODUCERS, DYNAMIC PANEL, ECONOMETRIC ANALYSIS, ECONOMETRICS, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC IMPLICATIONS, ECONOMIC INTEGRATION, ECONOMIC LITERATURE, ECONOMIC POLICIES, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC STATISTICS, ECONOMIC STUDIES, ECONOMIC THEORY, ECONOMICS, ECONOMIES OF SCALE, EDUCATED PEOPLE, EDUCATIONAL ATTAINMENT, EMPIRICAL EVIDENCE, EMPIRICAL GROWTH LITERATURE, EMPIRICAL LITERATURE, EMPIRICAL STUDIES, EMPLOYMENT EQUATIONS, ENFORCEMENT OF CONTRACTS, ERROR TERM, ESTIMATED COEFFICIENTS, ESTIMATION METHOD, ESTIMATION TECHNIQUES, EXOGENOUS VARIABLES, EXPLANATORY VARIABLES, EXPORT MARKET, EXPORTS, EXTERNAL CONDITIONS, FACTOR PRICE, FACTOR PRICE EQUALIZATION, FINANCIAL DEPTH, FINANCIAL DERIVATIVES, FINANCIAL DEVELOPMENT, FINANCIAL FLOWS, FINANCIAL INSTITUTIONS, FINANCIAL MARKET, FINANCIAL MARKET DEVELOPMENT, FINANCIAL MARKETS, FINANCIAL SECTOR, FISCAL POLICIES, FORECASTS, FOREIGN ASSETS, FOREIGN DIRECT INVESTMENT, FOREIGN FIRMS, FOREIGN TRADE, FREE TRADE, FREE TRADE AGREEMENT, FREE TRADE AGREEMENTS, GDP, GDP PER CAPITA, GLOBAL ECONOMY, GLOBAL INTEGRATION, GLOBALIZATION, GRAVITY MODEL, GROWTH DETERMINANTS, GROWTH EFFECT, GROWTH PERFORMANCE, GROWTH RATE, GROWTH RATES, GROWTH REGRESSIONS, HUMAN CAPITAL, IMPACT OF TRADE, IMPERFECT COMPETITION, IMPORT TARIFFS, INCOME, INCOME CONVERGENCE, INCOME DISTRIBUTION, INCOME INEQUALITY, INCOME LEVELS, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INEQUALITY DETERMINANTS, INFLATION RATE, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE PROVISION, INTERNATIONAL FINANCIAL INTEGRATION, INTERNATIONAL MARKETS, INTERNATIONAL TRADE, INVESTMENT RATE, LABOR MARKET, LABOR MARKETS, LAGGED DEPENDENT, LAGGED LEVELS, LAGGED VALUES, LANDLOCKED COUNTRIES, LDCS, LIFE EXPECTANCY, LOCAL CURRENCY, LONG RUN, MACROECONOMIC FLUCTUATIONS, MACROECONOMIC MANAGEMENT, MACROECONOMIC VOLATILITY, MACROECONOMICS, MARKET DEVELOPMENT, MARKET SIZE, MEASURE OF TRADE, MOBILE PHONES, MONETARY ECONOMICS, MULTINATIONAL FIRMS, 0 HYPOTHESIS, OIL EXPORTER, OIL EXPORTERS, OUTPUT, OUTPUT PER CAPITA, PER CAPITA GROWTH, POLICY CHANGES, POLICY RESEARCH, POLITICAL ECONOMY, POLITICAL INSTABILITY, POLITICAL RISK, PORTFOLIO, POSITIVE EFFECTS, PRICE STABILITY, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROMOTING GROWTH, PROTECTIONIST POLICIES, RANDOM WALK, REAL GDP, REFORM POLICIES, REGIONAL INTEGRATION, REGIONAL TRADE, REGIONAL TRADE AGREEMENTS, REGRESSION ANALYSIS, REGULATORY FRAMEWORK, RESOURCE ALLOCATION, SECONDARY ENROLLMENT, SECONDARY SCHOOLING, SERIAL CORRELATION, SMALL COUNTRIES, SPECIALIZATION, STANDARD DEVIATION, STATISTICAL ANALYSIS, STRUCTURAL POLICIES, TARIFF REDUCTIONS, TECHNOLOGICAL INNOVATION, TELECOMMUNICATIONS, TELEPHONE PENETRATION, TRADE AGREEMENT, TRADE BARRIERS, TRADE FLOWS, TRADE INTEGRATION, TRADE LIBERALIZATION, TRADE MORE, TRADE OPENNESS, TRADE PATTERNS, TRADE POLICIES, TRADE POLICY, TRADE REFORM, TRADE REFORMS, TRADE REGIMES, TRADE VOLUMES, TRADING COSTS, TRANSITIONAL CONVERGENCE, VOLUME OF TRADE, WAGES, WEALTH, WORLD DEVELOPMENT INDICATORS, WORLD ECONOMY, WORLD TRADE,
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100929130215
https://hdl.handle.net/10986/3920
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