Calderón, CésarPoggioa, Virginia2012-03-192012-03-192010-09-01https://hdl.handle.net/10986/3920This paper examines the effects of trade on growth among Central America-Dominican Republic Free Trade Agreement countries. To accomplish this task, the authors collected a panel data set of 136 countries over 1960-2010, and estimated cross-country growth regressions using an econometric methodology that accounts for unobserved effects and the likely endogeneity of the growth determinants. Following recent empirical efforts, they tested whether the impact of trade openness on growth may be more effective after surpassing a "minimum threshold" in specific areas closely related to economic development. The analysis finds not only that there is a robust causal link from trade to growth, but also that the growth benefits from trade are larger in countries with higher levels of education and innovation, deeper financial markets, a stronger institutional framework, more developed infrastructure networks, a high level of integration with world capital markets, and less stringent economic regulations. On average, rising trade has benefited growth in Central America-Dominican Republic Free Trade Agreement countries. However, the lack of progress in structural reforms has not allowed these countries to maximize the potential benefits from trade.CC BY 3.0 IGOADVERSE EFFECTADVERSE EFFECTSAGGREGATE LEVELAGGREGATE VOLATILITYAGRICULTURAL PRODUCTIVITYANNUAL GROWTHANNUAL GROWTH RATEASSETSBENCHMARKBONDBUSINESS OPPORTUNITIESCAPITAL GOODSCAPITAL INVESTMENTCAPITAL MARKETSCENTRAL BANKCHANGES IN TRADECOEFFICIENT ESTIMATECOMPARATIVE ADVANTAGECOMPARATIVE ADVANTAGESCONDITIONAL CONVERGENCECONSUMER GOODSCOUNTRY CHARACTERISTICSCOUNTRY SPECIFICCROSS COUNTRYCURRENCYDEBTDEBT INSTRUMENTSDEBT TO EQUITY RATIOSDEMAND ELASTICITIESDEMOCRATIC ACCOUNTABILITYDEPENDENT VARIABLEDEVELOPED COUNTRIESDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDEVELOPMENT INDICATORSDEVELOPMENT REPORTDIMINISHING RETURNSDOMESTIC CREDITDOMESTIC PRODUCERSDYNAMIC PANELECONOMETRIC ANALYSISECONOMETRICSECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC IMPLICATIONSECONOMIC INTEGRATIONECONOMIC LITERATUREECONOMIC POLICIESECONOMIC POLICYECONOMIC REFORMECONOMIC STATISTICSECONOMIC STUDIESECONOMIC THEORYECONOMICSECONOMIES OF SCALEEDUCATED PEOPLEEDUCATIONAL ATTAINMENTEMPIRICAL EVIDENCEEMPIRICAL GROWTH LITERATUREEMPIRICAL LITERATUREEMPIRICAL STUDIESEMPLOYMENT EQUATIONSENFORCEMENT OF CONTRACTSERROR TERMESTIMATED COEFFICIENTSESTIMATION METHODESTIMATION TECHNIQUESEXOGENOUS VARIABLESEXPLANATORY VARIABLESEXPORT MARKETEXPORTSEXTERNAL CONDITIONSFACTOR PRICEFACTOR PRICE EQUALIZATIONFINANCIAL DEPTHFINANCIAL DERIVATIVESFINANCIAL DEVELOPMENTFINANCIAL FLOWSFINANCIAL INSTITUTIONSFINANCIAL MARKETFINANCIAL MARKET DEVELOPMENTFINANCIAL MARKETSFINANCIAL SECTORFISCAL POLICIESFORECASTSFOREIGN ASSETSFOREIGN DIRECT INVESTMENTFOREIGN FIRMSFOREIGN TRADEFREE TRADEFREE TRADE AGREEMENTFREE TRADE AGREEMENTSGDPGDP PER CAPITAGLOBAL ECONOMYGLOBAL INTEGRATIONGLOBALIZATIONGRAVITY MODELGROWTH DETERMINANTSGROWTH EFFECTGROWTH PERFORMANCEGROWTH RATEGROWTH RATESGROWTH REGRESSIONSHUMAN CAPITALIMPACT OF TRADEIMPERFECT COMPETITIONIMPORT TARIFFSINCOMEINCOME CONVERGENCEINCOME DISTRIBUTIONINCOME INEQUALITYINCOME LEVELSINCREASING RETURNSINCREASING RETURNS TO SCALEINEQUALITY DETERMINANTSINFLATION RATEINFRASTRUCTURE INVESTMENTINFRASTRUCTURE PROVISIONINTERNATIONAL FINANCIAL INTEGRATIONINTERNATIONAL MARKETSINTERNATIONAL TRADEINVESTMENT RATELABOR MARKETLABOR MARKETSLAGGED DEPENDENTLAGGED LEVELSLAGGED VALUESLANDLOCKED COUNTRIESLDCSLIFE EXPECTANCYLOCAL CURRENCYLONG RUNMACROECONOMIC FLUCTUATIONSMACROECONOMIC MANAGEMENTMACROECONOMIC VOLATILITYMACROECONOMICSMARKET DEVELOPMENTMARKET SIZEMEASURE OF TRADEMOBILE PHONESMONETARY ECONOMICSMULTINATIONAL FIRMS0 HYPOTHESISOIL EXPORTEROIL EXPORTERSOUTPUTOUTPUT PER CAPITAPER CAPITA GROWTHPOLICY CHANGESPOLICY RESEARCHPOLITICAL ECONOMYPOLITICAL INSTABILITYPOLITICAL RISKPORTFOLIOPOSITIVE EFFECTSPRICE STABILITYPRODUCTIVITYPRODUCTIVITY GROWTHPROMOTING GROWTHPROTECTIONIST POLICIESRANDOM WALKREAL GDPREFORM POLICIESREGIONAL INTEGRATIONREGIONAL TRADEREGIONAL TRADE AGREEMENTSREGRESSION ANALYSISREGULATORY FRAMEWORKRESOURCE ALLOCATIONSECONDARY ENROLLMENTSECONDARY SCHOOLINGSERIAL CORRELATIONSMALL COUNTRIESSPECIALIZATIONSTANDARD DEVIATIONSTATISTICAL ANALYSISSTRUCTURAL POLICIESTARIFF REDUCTIONSTECHNOLOGICAL INNOVATIONTELECOMMUNICATIONSTELEPHONE PENETRATIONTRADE AGREEMENTTRADE BARRIERSTRADE FLOWSTRADE INTEGRATIONTRADE LIBERALIZATIONTRADE MORETRADE OPENNESSTRADE PATTERNSTRADE POLICIESTRADE POLICYTRADE REFORMTRADE REFORMSTRADE REGIMESTRADE VOLUMESTRADING COSTSTRANSITIONAL CONVERGENCEVOLUME OF TRADEWAGESWEALTHWORLD DEVELOPMENT INDICATORSWORLD ECONOMYWORLD TRADEWorld Bank10.1596/1813-9450-5426