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HWWI

Weltwirtschaft

Trade and economic growth: A re-examination of the empirical evidence

17.04.2012 | HWWI Research Paper | von Matthias Busse, Jens Königer

While trade integration is often regarded as a principal determinant of economic growth, the empirical evidence for a causal linkage between trade and growth is ambiguous. This paper argues that the effect of trade in dynamic panel estimations depends crucially on the specification of trade. Both from a theoretical as well as an empirical point of view one specification is preferred: the volume of exports and imports as a share of lagged total GDP. For this trade measure, a positive and highly significant impact on economic growth can be found.