The Relationship between Trade and Income: The Case of Developed Countries

International Research Journal of Finance and Economics, Issue 111, July 2013

8 Pages Posted: 13 Jan 2015

See all articles by Muhammad Tahir

Muhammad Tahir

Comsats Institute of Information Technology

Norulazidah Dk

University of Brunei Darussalam

Date Written: July 1, 2013

Abstract

This paper focuses on developed OECD member economies to examine the impact of trade openness on per capita GDP. Cross-sectional data of the member economies for the year 2010 are used in the empirical analysis. The potential endogeneity problem associated with the measure of trade openness is handled through instrumentation strategy based on the gravity model of international trade. Results show that bilateral trade openness is significantly related with per capita GDP within the OECD organization. The impact of employment rate on per capita GDP is also substantial. Though both tertiary education and investment are statistically insignificant they importantly hold the expected coefficients in the analysis.

Keywords: Trade Openness, OECD, Endogeneity, GDP, Gravity Model

JEL Classification: F14

Suggested Citation

Tahir, Muhammad and Dk, Norulazidah, The Relationship between Trade and Income: The Case of Developed Countries (July 1, 2013). International Research Journal of Finance and Economics, Issue 111, July 2013, Available at SSRN: https://ssrn.com/abstract=2548102

Muhammad Tahir (Contact Author)

Comsats Institute of Information Technology ( email )

University Road, Tobe Camp Abbottabad
Abbottabad, KPK 22060
Pakistan
+923450257036 (Phone)
3450257036 (Fax)

Norulazidah Dk

University of Brunei Darussalam ( email )

Jalan Tungku Link
Gadong
Bandar Seri Begawan, BE1410
Brunei

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