Trade policy and human development: a cross‐country perspective

Desi Peneva and Rati Ram

International Journal of Social Economics, 2013, vol. 40, issue 1, 51-67

Abstract: Purpose - The purpose of this research is to study the relation between “restrictiveness” of a country's trade policy and its socio‐economic well‐being as reflected in the indicators of human development. Design/methodology/approach - A recently‐developed trade‐restrictiveness‐index (TRI), which seems superior to almost all existing indexes of trade policy or “outward orientation”, is related with infant‐mortality, child‐mortality, maternal‐mortality, access to safe water, access to basic sanitation, and secondary‐school enrollment, which are well‐known and important measures of a country's human development and are closely related to several Millennium Development Goals. In addition to a consideration of the covariation between TRI and the six human‐development measures, estimates from parsimonious regression models are studied. Sensitivity checks are conducted by considering covariations and regression estimates for another trade‐policy index and different country groups. Findings - The evidence overwhelmingly shows that, contrary to the position shared and disseminated widely, there is no indication that a more restrictive international trade policy has a significant negative association with human development or socio‐economic well‐being. Every correlation between trade restrictiveness index and human‐development measures is close to zero. Almost every regression coefficient of trade‐restrictiveness‐index lacks statistical significance at any meaningful level, and a consistent pattern is noted across two measures of trade policy and different country groups. Social implications - The evidence suggests much caution in the articulation and dissemination of the widely‐shared view that a more restrictive trade policy is detrimental to a country's socio‐economic well‐being. In particular, it implies that international organizations and developed‐country governments may not force developing‐country governments to adopt more “outward‐oriented” trade policies, but may let them choose the trade‐policy stance they find appropriate for their country. The estimates also reinforce the view that great care be exercised by scholars in the choice of trade‐openness measures for studying the relation between trade policy and economic well‐being. Originality/value - In the vast literature on the nexus between trade policy and economic well‐being, this is probably the only study that relates six important measures of human development with what seems to be the best available index of restrictiveness of a country's trade policy. Therefore, the research, which is based on a fairly large cross‐country sample, may be deemed as highly significant on a topic of much scientific and policy relevance.

Keywords: Trade policy; Outward orientation; Trade restrictiveness index; Human development; Human resource development; Trade (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijsepp:v:40:y:2013:i:1:p:51-67

DOI: 10.1108/03068291311283436

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