Trade space and trade policy: an empirical assessment
Abstract
Purpose
The purpose of this paper is to examine the behavior of governments in terms of trade policy design when they experience a lack of foreign resources from international trade after ensuring the sustainability of their external debt. To do so, the paper defines two concepts of trade space: “De Facto Trade Space” and “De Jure trade space.”
Design/methodology/approach
To conduct this study, the author relies on a panel data set comprising 109 countries over the period 1998–2014. To perform the empirical analysis, the author has mainly used the system generalized methods of moments approach.
Findings
The empirical analysis suggests evidence that trade space matters significantly for trade policy. Indeed, “De Facto Trade Space” is consistently associated with greater trade policy liberalization, with this positive effect being higher, the higher the development level – proxied by the real per capita income – of the concerned country. “De Jure Trade Space” tends to lead to greater trade policy liberalization in less advanced developing countries, but is associated with the adoption of trade restrictive measures in more advanced countries. Additionally, results suggest different impacts on trade policy of “Positive De Jure Trade Space” and “Negative De Jure Trade Space.”
Research limitations/implications
These findings suggest that the trade space, as defined in this study, plays a key role in trade policy design by policymakers.
Practical implications
The current study shows that trade space could significantly matter for trade policy design by policymakers.
Originality/value
To the best of the author’s knowledge, this is the study dealing directly with the “trade space” concept as well as its impact on trade policy.
Keywords
Acknowledgements
The author would like to express the gratitude to the anonymous reviewers as well as the editor for their useful comments on this paper. The author would also like to sincerely thank Professor J.R. Shackleton and other anonymous researchers who provided very useful comments on an earlier version of this paper. The latter represents the personal opinions of individual staff members of the WTO and is not meant to represent the position or opinions of the WTO or its members, nor the official position of any staff members. Any errors or omissions are the fault of the author. The author of this paper have not made the author research data set openly available. Any enquiries regarding the data set can be directed to the corresponding author.
Citation
Gnangnon, S.K. (2018), "Trade space and trade policy: an empirical assessment", Journal of Economic Studies, Vol. 45 No. 3, pp. 498-520. https://doi.org/10.1108/JES-02-2017-0033
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited