Does Trade Cause Growth?

摘要

Examining the correlation between trade and income cannot identify the direction of causation between the tow. Countries' geographic characteristics, however, have important effects on trade, and are plausibly uncorrelated with other determinants of income. This paper therefore constructs measures of the geographic component of countries' trade, and uses those measures to obtain instrumental variables estimates of the effect of trade on income. The results provide no evidence that ordinary least-squares estimates overstate the effects of trade. Further, they suggest that trade has a quantitative large and robust, though only moderately statistically significant, positive effect on income.