Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the twenty-five years since Rodríguez and Rodrik’s (2000) critical survey of empirical work on this question, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. I examine three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms have had a positive impact on economic growth, on average, although the effect is heterogeneous across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
DBx: It’s amazing, in a way, that such research needs to be done. But needs to be done it does, for the belief is widespread and intense that government-imposed barriers to their own citizens’ access to goods, services, and inputs from abroad is a means of increasing the quantity of goods, services, and inputs those citizens end up with. Protectionism is a whackadoodle idea, but it’s a whackadoodle idea into which many intellectuals and politicians pour a great deal of effort to create for it an aura of credibility.
I’m confident that Dani Rodrik does not believe that it was an open question decades ago if the elimination of Jim Crow barriers would raise or lower the living standards of black Americans in general. Of course it would raise them. Able to trade more freely with nonblack Americans, black Americans would obviously on the whole be enriched over time. Attempting to empirically measure these gains might have been scientifically worthwhile, but no one would have taken seriously an empirical study that purported to show that black people’s greater freedom to trade with nonblack people harmed black people economically.
Ditto, by the way, about any study purporting to show that whites and other nonblack Americans were generally economically harmed by the demise of Jim Crow.
And yet economically there is no essential difference separating the freeing of black people to trade with nonblack people and the freeing of the denizens of country A to trade with the denizens of countries other than A. If it’s obvious (as it is and ought to be) that leaving blacks free to trade with nonblacks results in blacks being better off economically than they would be were their trade with nonblacks restricted by government, why isn’t it equally obvious that leaving, say, Americans free to trade with non-Americans results in Americans being better off economically than they are when their freedom to trade with non-Americans is restricted?
