1 First Presentation The Impact of Trade Liberalization on Economic Growth and Development Mario Liebensteiner Johannes Kepler University, Linz Supervisor: Dr. Michael Landesmann

2 Structure Overall Research Question –Does Trade Liberalization promote Economic Growth and Development? –Distinction of Growth and Development –Call for Further Research (Hallak, 2004; Nouzard & Powell, 2004; Squalli & Wilson, 2006) 3 Main Parts –Literature Overview, History –Econometric Approach –Country Studies: China, India

3 First Part Motivation Literature Overview –History of Trade Liberalization Evaluation of the Recent Discussion –Pro-Liberalization and Critics Recent Research by Other Authors –Growth and Development

4 Second Part Econometric Approach Cross-Country Regressions –Growth as Dependent Variable –Development Variables as Dependent Variables e.g. Regressions on other Development Variables

5 Second Part (cont. (1)) –5 Year Averages to Control for Autocorrelation (to capture Long-Term Effects) and Measurement Errors (Gourdon, et.al. 2006) –Maybe Lagged Variables and Interactive Terms Measures of Trade Openness Trade Intensity: (Exp+Imp)/GDP (Nouzard & Powell, 2004) Composite Trade Intensity (Squalli & Wilson, 2006) Black Market Premium (Dollar, 1992; Nouzard & Powell, 2004) SW-Indicator (Sachs & Warner, 1995) –Trade Policy Variables Tariffs and Non-Tariff Barriers (Rodrik, 2000)

6 Second Part (cont. (2)) Data Sources: –Penn World Tables, Barro-Lee-Education Data –IMF, UN, World Bank, FIW, GDN, WIID… Robustness Tests –Comparing Openness Ranks of Countries with different Data Sets –Estimation of Same Equations but different Data Sets (Squalli & Wilson, 2006)

7 Third Part Individual Country Cases: China & India –Econometrics rather difficult –Thus Descriptive Analysis Why country studies? –Interesting to Look at Growth and Development Variables in a More Complex Context -> Detailed Insight Health, Poverty, Education, Urbanization, Employment, Wealth, Regional Inequality

8 Third Part (cont. (2)) Different Developments –esp. Employment, Inequality of Incomes, Regional Inequality Different Strategies –Both Countries are Successfully Integrated –Benefit from International Trade –Neither Followed Orthodox Trade Policies (Stiglitz, 2005)

9 Third Part (cont. (1)) India –Gradual Liberalization Strategy, Low-Tech Exports in Goods and Services, High-Tech Service Exports only in IT-Sector (Bussièr & Mehl, 2008) China –Gradually Implemented Trade Strategy, Carefully Sequenced (Stiglitz, 2005), High-Tech Exports in Goods –South-West Industrialization, Imports from emerging Asian Economies to Re-Export to Mature Economies –Important Trade Partner for India (but Reverse is Not True) (Bussièr & Mehl, 2008)