Comments on economics, mystery fiction, drama, and art.

Sunday, June 02, 2013

Generating the Wealth of Nations 28: Trade Costs and Economic Growth

This spins off one of the charts in lecture 6, section 5, which shows the relationship between relative trade costs and the level of real GDP per capita (from the article "International trade and income differences,"  by Michael Waugh, published in the American Economic Review in 2010.  My take on this is that we need to look at the relationship between the costs of trade (e.g., tariffs, shipping costs...) and the rate of growth of real GDP per capita.  So I extracted Waugh's data on trade costs, added information of real GDP per capita growth (from 2005 to 2010), and I got this:

(Click to enlarge.)

There is not a clear negative relationship (higher trade costs associated with slower growth), and in fact the correlation is (insignificantly) positive.



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