Abstract
Previous studies on the determinants of productivity emphasized the role of trade and institutions
but omitted trade policy due to endogeneity concerns. This paper considers the role of one important
element of trade policy: free trade agreements (FTAs). Based on recent work on the determinants
of FTAs, we suggest an instrument which is based on the propensity to enter an FTA due to
(exogenous) geographical characteristics. We find that differences in institutional quality and trade,
due to variations in geography and trade policy, have a sizeable effect on productivity and can
explain the huge variation in per capita income across countries.
but omitted trade policy due to endogeneity concerns. This paper considers the role of one important
element of trade policy: free trade agreements (FTAs). Based on recent work on the determinants
of FTAs, we suggest an instrument which is based on the propensity to enter an FTA due to
(exogenous) geographical characteristics. We find that differences in institutional quality and trade,
due to variations in geography and trade policy, have a sizeable effect on productivity and can
explain the huge variation in per capita income across countries.
| Originalsprache | Englisch |
|---|---|
| Seiten (von - bis) | 867 - 891 |
| Fachzeitschrift | European Economic Review |
| Jahrgang | 52 |
| Publikationsstatus | Veröffentlicht - 1 Okt. 2008 |