The Blocked Southern and Midwestern Global Warming Conversation

A reminder that eliminating trade barriers and boosting trade through reducing tariffs, reducing quotas, and harmonizing regulations is one of the two things (along with deficit reduction at full employment when interest rates are high) we know how to do to materially and significantly boost prosperity in the medium run. Yes, it has an impact on income distribution. But everything has an impact on income distribution. Focusing your policies for equity on trade restrictions is counterproductive. Yes, Thea Lee, I see you:

Doug Irwin: Does Trade Reform Promote Economic Growth? A Review of Recent Evidence: "The findings from recent research have been remarkably consistent. For developing countries that are behind the technological frontier and have significant import restrictions, there appears to be a measurable economic payoff from more liberal trade policies... economic growth... roughly 1.0–1.5 percentage points higher... cumulated to about 10–20 percent higher income after a decade. The effect is heterogeneous across countries, because countries differ in the extent of their reforms and the context in which reform took place. At a microeconomic level, the gains in industry productivity from reducing tariffs on imported intermediate goods—inputs used to produce final goods—are even more sharply identified. They show up time and again in country after country. Some questions remain about how much of the economic growth following trade reform can be attributed to trade policy changes alone, as other market reforms are sometimes adopted at the same time. Even if the reduction of trade barriers accounts for only a part of the observed increase in growth, however, the cumulative gains from reform appear to be substantial. As Estevadeordal and Taylor (2013, 1689) ask, 'Is there any other single policy prescription of the past twenty years that can be argued to have contributed between 15 percent and 20 percent to developing country income?'...


#noted

Comments