Growth, trade, institutions, and geography: new empirical evidence

Thiago Rocha Fabris, André Filipe Zago de Azevedo and Magnus Dos Reis

EconomiA, 2025, vol. 26, issue 3, 317-334

Abstract: PurposeThis study investigates the implications of trade, institutional and geographical variables on economic growth. The proposed analytical framework extends the seminal works of Frankel and Romer (1999), Rodrik et al. (2004), Silva and Tenreyro (2006) and Squalli and Wilson (2011).Design/methodology/approachApplying a comprehensive panel database that includes 133 countries during the period 1996–2014. Our estimators encompass three dimensions (fixed effects) and use the Pseudo Poisson Maximum Likelihood (PPML) approach to create an instrument for trade. This approach effectively addresses the issues associated with endogenous regressors.FindingsFindings from this study demonstrate a significant correlation between economic growth and the variables of trade, institutions and geography, with trade surfacing as the most influential factor. Notably, the impact of these factors appears to be diminished in low-income countries, especially in the parameters that reflect the role of institutions on per capita income.Originality/valueThe originality of the study is underscored by four key aspects: the employment of a unique econometric approach, the use of a three-dimensional panel database with fixed effect estimators and PPML, the inclusion of a novel measure of trade openness diverging from the conventional literature in the bilateral trade equation, and finally, the implementation of robustness tests probing the sensitivity of per capita income to institutions, trade and geography.

Keywords: Growth; Trade; Institutions; Geography; Endogeny (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:econpp:econ-03-2024-0037

DOI: 10.1108/ECON-03-2024-0037

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