Trade Policy and its Impact On Economic Growth: The Chilean Experience in the Period of 1960 to 1998

According to trade theory trade policy can impact quite differently (positively, negatively, nil) on economic growth depending on the model assumptions such as perfect or imperfect competition due to the existence of economies to scale or externalities. This result is replicated when the impact of trade policy on growth is judged by neoclassical, semi-endogenous and endogenous growth theory. However, the majority of elder empirical studies based on cross-section models yield a positive impact of trade policy on growth. More recent investigations applying pooled analysis have difficulties to demonstrate the positive linkage between trade policy and growth and show rather mixed results. It is the objective of this paper to contribute to a more consistent test of the linkage between trade policy and growth by pointing out the questionability of certain indicators of trade policy, by examining the indirect link between trade and growth, by working with long-run time-series and by applying time series techniques.