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The Impact of Trade Liberalization on Economic Growth and Development: Insights from China and India

This research investigates whether trade liberalization fosters economic growth and development, focusing on two significant case studies: China and India. It explores the historical context of trade liberalization, evaluates existing literature, and employs econometric methods to analyze cross-country regressions and various development variables. The findings indicate that both countries have successfully integrated into the global market, albeit through different trade strategies. The study concludes that while trade liberalization can stimulate growth, its effects on development must be analyzed in a broader socio-economic context.

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The Impact of Trade Liberalization on Economic Growth and Development: Insights from China and India

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  1. First Presentation The Impact of Trade Liberalization on Economic Growth and Development Mario Liebensteiner Johannes Kepler University, Linz Supervisor: Dr. Michael Landesmann 2009-05-26

  2. Overall Research Question Does Trade Liberalization promote Economic Growth and Development? Distinction of Growth and Development Call for Further Research(Hallak, 2004; Nouzard & Powell, 2004; Squalli & Wilson, 2006) 3 Main Parts Literature Overview, History Econometric Approach Country Studies: China, India Structure

  3. First Part • Motivation • Literature Overview • History of Trade Liberalization • Evaluation of the Recent Discussion • Pro-Liberalization and Critics • Recent Research by Other Authors • Growth and Development

  4. Second Part • Econometric Approach • Cross-Country Regressions • Growth as Dependent Variable • Development Variables as Dependent Variables e.g. • Regressions on other Development Variables

  5. Second Part (cont. (1)) • 5 Year Averages to Control for Autocorrelation (to capture Long-Term Effects) and Measurement Errors (Gourdon, et.al. 2006) • Maybe Lagged Variables and Interactive Terms Measures of Trade Openness • Trade Intensity: (Exp+Imp)/GDP (Nouzard & Powell, 2004) • Composite Trade Intensity (Squalli & Wilson, 2006) • Black Market Premium (Dollar, 1992; Nouzard & Powell, 2004) • SW-Indicator (Sachs & Warner, 1995) • Trade Policy Variables • Tariffs and Non-Tariff Barriers (Rodrik, 2000)

  6. Second Part (cont. (2)) • Data Sources: • Penn World Tables, Barro-Lee-Education Data • IMF, UN, World Bank, FIW, GDN, WIID… • Robustness Tests • Comparing Openness Ranks of Countries with different Data Sets • Estimation of Same Equations but differentData Sets (Squalli & Wilson, 2006)

  7. Third Part • Individual Country Cases: China & India • Econometrics rather difficult • Thus Descriptive Analysis • Why country studies? • Interesting to Look at Growth and Development Variables in a More Complex Context -> Detailed Insight • Health, Poverty, Education, Urbanization, Employment, Wealth, Regional Inequality

  8. Third Part (cont. (2)) • Different Developments • esp. Employment, Inequality of Incomes, Regional Inequality • Different Strategies • Both Countries are Successfully Integrated • Benefit from International Trade • Neither Followed Orthodox Trade Policies (Stiglitz, 2005)

  9. Third Part (cont. (1)) • India • Gradual Liberalization Strategy, Low-Tech Exports in Goods and Services, High-Tech Service Exports only in IT-Sector (Bussièr & Mehl, 2008) • China • Gradually Implemented Trade Strategy, Carefully Sequenced (Stiglitz, 2005), High-Tech Exports in Goods • South-West Industrialization, Imports from emerging Asian Economies to Re-Export to Mature Economies • Important Trade Partner for India (but Reverse is Not True) (Bussièr & Mehl, 2008)

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