Free trade

About: Free trade is a research topic. Over the lifetime, 32950 publications have been published within this topic receiving 615379 citations.

Environmental Impacts of a North American Free Trade Agreement

Abstract: In general, a reduction in trade barriers will affect the environment by expanding the scale of economic activity, by altering the composition of economic activity and by initiating a change in the techniques of production. We present empirical evidence to assess the relative magnitudes of these three effects as they apply to further trade liberalization in Mexico. We first use comparable measures of three air pollutants in a cross-section of urban areas located in 42 countries to study the relationship between air quality and economic growth. We find for two pollutants (sulphur dioxide and `smoke') that concentrations increase with per capita GDP at low levels of national income, but decrease with GDP growth at higher levels of income. We then study the determinants of the industry pattern of US imports from Mexico and of value added by Mexico's maquiladora sector. We investigate whether the size of pollution abatement costs in US industry influences the pattern of international trade and investment. Finally, we use the results from a computable general equilibrium model to study the likely compositional effect of a North American Free Trade Agreement (NAFTA) on pollution in Mexico.

The ‘National System of Innovation’ in historical perspective

Abstract: Contrary to some recent work on so-called 'globalisation', this paper argues that national and regional systems of innovation remain an essential domain of economic analysis. Their importance derives from the networks of relationships which are necessary for any firm to innovate. Whilst external international connections are certainly of growing importance, the influence of the national education system, industrial relations, technical and scientific institutions, government policies, cul- tural traditions and many other national institutions is fundamental. The historical examples of Germany, Japan and the former USSR illustrate this point, as well as the more recent contrast between East Asian and Latin American countries. Introduction: The National System of Friedrich List According to this author's recollections, the first person to use the expression 'National System of Innovation' was Bengt-Ake Lundvall and he is also the editor of a highly original and thought-provoking book (1992) on this subject. However, as he and his colleagues would be the first to agree (and as Lundvall himself points out) the idea actually goes back at least to Friedrich List's conception of "The National System of Political Economy' (1841), which might just as well have been called 'The National System of Innovation'. The main concern of List was with the problem of Germany overtaking England and, for underdeveloped countries (as Germany then was in relation to England), he advocated not only protection of infant industries but a broad range of policies designed to accelerate, or to make possible, industrialisation and economic growth. Most of these policies were concerned with learning about new technology and applying it. The racialist and colonialist overtones of the book were in strong contrast to the inter- nationalist cosmopolitan approach of the classical free trade economists and List's belief that Holland and Denmark should join the German 'Bund' and acquire German nationality because of their 'descent and whole character' reads somewhat strangely in the European Community of today. Nevertheless, despite these unattractive features of his outlook, he clearly anticipated many contemporary theories. After reviewing the changing ideas of economists about development in the years since the Second World War, the World Bank (1991) concludes that it is intangible investment in knowledge accumulation which is decisive rather than physical capital investment, as was at one time believed (pages 33-35). The Report cites the 'New Growth Theory'

Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence

Abstract: Do countries with lower policy-induced barriers to international trade grow faster, once other relevant country characteristics are controlled for? There exists a large empirical literature providing an affirmative answer to this question. We argue that methodological problems with the empirical strategies employed in this literature leave the results open to diverse interpretations. In many cases, the indicators of openness used by researchers are poor measures of trade barriers or are highly correlated with other sources of bad economic performance. In other cases, the methods used to ascertain the link between trade policy and growth have serious shortcomings. Papers that we review include those by Dollar (1992), Ben-David (1993), Sachs and Warner (1995), Edwards (1998), and Frankel and Romer (1999). We find little evidence that open trade policies-in the sense of lower tariff and nontariff barriers to trade-are significantly associated with economic growth.

Market Size, Trade, and Productivity

Abstract: We develop a monopolistically competitive model of trade with firm heterogeneity—in terms of productivity differences—and endogenous differences in the "toughness" of competition across markets—in terms of the number and average productivity of competing firms. We analyse how these features vary across markets of different size that are not perfectly integrated through trade; we then study the effects of different trade liberalization policies. In our model, market size and trade affect the toughness of competition, which then feeds back into the selection of heterogeneous producers and exporters in that market. Aggregate productivity and average mark-ups thus respond to both the size of a market and the extent of its integration through trade (larger, more integrated markets exhibit higher productivity and lower mark-ups). Our model remains highly tractable, even when extended to a general framework with multiple asymmetric countries integrated to different extents through asymmetric trade costs. We believe this provides a useful modelling framework that is particularly well suited to the analysis of trade and regional integration policy scenarios in an environment with heterogeneous firms and endogenous mark-ups.