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The Impact of International Trade Flows on Economic Growth in Brazilian States

Marie Daumal () and Selin Özyurt

Review of Economics and Institutions, 2011, vol. 2, issue 1

Abstract: This paper explores the impact of trade openness on the economic growth of Brazilian states according to their initial income level. This empirical study covers 26 Brazilian states over the period 1989-2002. Growth rates of Brazilian states are modeled as dependent on international trade flows and a set of control variables such as initial income level, human capital, private and public physical capital, growth rate of labor force and a number of interaction terms with trade openness. This empirical analysis relies on dynamic growth regressions, using the system GMM estimator. The results indicate that openness is more beneficial to states with a high level of initial per capita income and therefore contributes to increased regional disparities in Brazil. In addition, trade openness favors more industrialized states, well-endowed in human capital, rather than states whose economic activity is mainly based on agriculture. These results have important policy implications since achieving balanced territorial development has become a priority for the Brazilian federal government over the last few decades.

Keywords: international trade; growth equation; GMM estimator; Brazilian states (search for similar items in EconPapers)
JEL-codes: F43 R11 (search for similar items in EconPapers)
Date: 2011
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