Trade, Regulations, and Income

We examine the relationship between openness and per-capita income using cross-country data from 126 countries. We find that trade leads to a higher standard of living in flexible economies, but not in rigid economies. Business regulation, especially on firm entry, is more important than financial d...

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Main Authors:	Freund, Caroline, Bolaky, Bineswaree
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Open Economy Macroeconomics F410 Production, Pricing, and Market Structure Size Distribution of Firms L110 Economics of Regulation L510 Economic Development: Human Resources Human Development Income Distribution Migration O150 International Linkages to Development Role of International Organizations O190
Online Access:	http://hdl.handle.net/10986/5751

id	okr-10986-5751
recordtype	oai_dc
spelling	okr-10986-57512021-04-23T14:02:23Z Trade, Regulations, and Income Freund, Caroline Bolaky, Bineswaree Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Open Economy Macroeconomics F410 Production, Pricing, and Market Structure Size Distribution of Firms L110 Economics of Regulation L510 Economic Development: Human Resources Human Development Income Distribution Migration O150 International Linkages to Development Role of International Organizations O190 We examine the relationship between openness and per-capita income using cross-country data from 126 countries. We find that trade leads to a higher standard of living in flexible economies, but not in rigid economies. Business regulation, especially on firm entry, is more important than financial development, higher education, or rule of law as a complementary policy to trade liberalization. Specifically, after controlling for the standard determinants of per-capita income, our results imply that a 1% increase in trade is associated with more than a one-half percent rise in per-capita income in economies that facilitate firm entry, but has no positive income effects in more rigid economies. The findings are consistent with Schumpeterian "creative destruction", which highlights the importance of new business entry in economic performance, and with previous firm-level studies showing that the beneficial effects of trade liberalization come largely from an intra-sectoral reallocation of resources. 2012-03-30T07:34:21Z 2012-03-30T07:34:21Z 2008 Journal Article Journal of Development Economics 03043878 http://hdl.handle.net/10986/5751 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Open Economy Macroeconomics F410 Production, Pricing, and Market Structure Size Distribution of Firms L110 Economics of Regulation L510 Economic Development: Human Resources Human Development Income Distribution Migration O150 International Linkages to Development Role of International Organizations O190
spellingShingle	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Open Economy Macroeconomics F410 Production, Pricing, and Market Structure Size Distribution of Firms L110 Economics of Regulation L510 Economic Development: Human Resources Human Development Income Distribution Migration O150 International Linkages to Development Role of International Organizations O190 Freund, Caroline Bolaky, Bineswaree Trade, Regulations, and Income
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	We examine the relationship between openness and per-capita income using cross-country data from 126 countries. We find that trade leads to a higher standard of living in flexible economies, but not in rigid economies. Business regulation, especially on firm entry, is more important than financial development, higher education, or rule of law as a complementary policy to trade liberalization. Specifically, after controlling for the standard determinants of per-capita income, our results imply that a 1% increase in trade is associated with more than a one-half percent rise in per-capita income in economies that facilitate firm entry, but has no positive income effects in more rigid economies. The findings are consistent with Schumpeterian "creative destruction", which highlights the importance of new business entry in economic performance, and with previous firm-level studies showing that the beneficial effects of trade liberalization come largely from an intra-sectoral reallocation of resources.
format	Journal Article
author	Freund, Caroline Bolaky, Bineswaree
author_facet	Freund, Caroline Bolaky, Bineswaree
author_sort	Freund, Caroline
title	Trade, Regulations, and Income
title_short	Trade, Regulations, and Income
title_full	Trade, Regulations, and Income
title_fullStr	Trade, Regulations, and Income
title_full_unstemmed	Trade, Regulations, and Income
title_sort	trade, regulations, and income
publishDate	2012
url	http://hdl.handle.net/10986/5751
_version_	1764396177657167872

Trade, Regulations, and Income

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