chapter  12
16 Pages

Fooling ourselves: evaluating the globalization and growth debate

WithJUAN CARLOS HALLAK AND JAMES LEVINSOHN

The question being asked is an important one. Broadly defined, that question is whether countries that trade more grow faster. Although it might seem obvious, it’s equally important to ask just why one might care about this question. If a country’s level of trade were somehow immutable and godgiven, economists might still find the relationship between trade and growth of intellectual interest. It would not, though, be the hot topic that it has in fact become. The reason most observers care about the relationship between trade and growth is because of its implications for policy. It is the idea that governments might somehow adjust their trade policies so as to enhance growth. Looked at from this vantage point, there is a behavioral aspect to the issue, not just a statistical relationship. If countries change their policies in certain ways, are they likely to experience higher growth?