Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index

19 Pages Posted: 2 Oct 2006

See all articles by Niclas Berggren

Niclas Berggren

Research Institute of Industrial Economics (IFN); University of Economics, Prague - Faculty of Economics and Public Administration

Henrik Jordahl

Örebro University - School of Business; Research Institute of Industrial Economics (IFN); CESifo; IZA

Abstract

While studies of the relationship between economic freedom and economic growth have shown it to be positive, significant and robust, it has rightly been argued that different areas of economic freedom may have quite different effects on growth. Along that line, Carlsson and Lundstrom (2002) present the surprising result that International exchange: Freedom to trade with foreigners is detrimental for growth. We find that Taxes on international trade seems to drive this result. However, using newer data and a more extensive sensitivity analysis, we find that it is not robust. Least Trimmed Squares-based estimation in fact renders the coefficient positive.

Keywords: free trade, economic freedom, economic growth

JEL Classification: E61, F13, F43, O24, O40, P17

Suggested Citation

Berggren, Niclas and Jordahl, Henrik, Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index. Public Choice, Vol. 122, Nos. 1-2, pp. 99-114, 2005, Available at SSRN: https://ssrn.com/abstract=933981

Niclas Berggren

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/nb

University of Economics, Prague - Faculty of Economics and Public Administration ( email )

nám. W. Churchilla 4
Praha, 130 67
Czech Republic

Henrik Jordahl (Contact Author)

Örebro University - School of Business ( email )

SE-70182 Orebro, Örebro SE-701 82
Sweden

HOME PAGE: http://https://www.oru.se/personal/henrik_jordahl

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/hj

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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