Market Access, Openness and Growth
This paper identifies a causal effect of openness to international trade on growth. It does so by using tariff barriers of the United States as instruments for the openness of developing countries. Trade liberalization by a large trading partner causes an expansion in the trade of other countries. Trade expansion induced by greater market access appears to cause a quantitatively large acceleration in the growth rates of developing countries. Eliminating existing developed world tariffs would increase developing country trade to GDP ratios by one third and growth rates by 0.6 to 1.6 percent per annum.
This paper has benefited from comments by Mary Amiti, Roberto Benelli, Gita Gopinath, Ruben Segura-Cayuela, Shang-Jin Wei and participants at seminars of at Chicago GSB, Colorado, Columbia, ETSG, IMF, UBC, UT Austin, and the World Bank. Thanks for generous support are due to the IMF. An earlier draft of this paper was entitled "Would Rich Country Trade Preferences Help Poor Countries Grow? Evidence from the Generalized System of Preferences." The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.