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| Title: |
A
Further Investigation between Trade and Income |
| Author: |
Ondrich, Jan; Richardson, J. David; Zhang,
Shuo |
| Author Affiliation: |
Department of Economics, Syracuse
University, USA; Statistics and Analysis Unit, Ministry of Community
and Social Services, Canada |
| Source: |
International
Economic Journal, March 2006, v. 20, no. 1, pp. 19-36 |
| Publication Date: |
March
2006 |
| Abstract: |
The link between openness and income has
received increasing attention as countries try to justify their
trade-promoting policies. Recent work of Frankel and Romer (1999)
examines the effect of trade on income. We explore how the estimates
of the trade effect change when we relax their assumption of
heteroscedasticity in the bilateral trade equation they use to
construct the instrument for the IV regression. Because the
instrument is constructed through a nonlinear transformation,
unequal disturbance variances imply inconsistency and not just
inefficiency of the Frankel-Romer estimates. We find a smaller
positive effect of trade than that found by Frankel and
Romer | |
