When Education Explains Strong Institutions: Trade Policy also Matters

D. Mamoon, S.M. Murshed

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Abstract

This paper empirically examines the contribution of trade liberalisation to differences in the level of prosperity across nations. We compare this with the relative contribution of institutional capacity to prosperity, as well as the role of human capital accumulation in that respect. We employ several concepts of institutional quality, trade policy and openness variables following various definitions prevalent in the literature. Unlike in the comparable study by Rodrik et al (2004) we have (a) included a role for human capital, (b) employed six institutional variables compared to one only in Rodrik et al (rule of law), (c) included trade policy variables, and not just openness indicators and (d) expanded the set of openness measures employed. We discover that opening up domestic markets to foreign competition by removing trade restrictions and barriers may promote economic performance. Furthermore, developing human capital is as important as superior institutional functioning for economic wellbeing. We find that openness counts for little per se in explaining income differences across countries. This is because it is an outcome and not a cause. Trade policies, and liberalisation, on the other hand, are not insignificant in explaining cross-country per-capita income variation. With regard to trade policies, export taxes are the most important in explaining cross-country per-capita income differences.
Original languageEnglish
Pages (from-to)1179-1210
Number of pages32
JournalSocial Indicators Research
Volume131
Issue number3
DOIs
Publication statusPublished - 2 Mar 2016

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trade policy
Economics
human capital
Education
prosperity
liberalization
education
income
domestic market
difference in income
capital accumulation
constitutional state
Taxes
economics
taxes
respect
cause
Openness
Trade Policy
performance

Keywords

  • Long term growth
  • Trade policy
  • Social development

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When Education Explains Strong Institutions : Trade Policy also Matters. / Mamoon, D.; Murshed, S.M.

In: Social Indicators Research, Vol. 131, No. 3, 02.03.2016, p. 1179-1210.

Research output: Contribution to journalArticle

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