Does free trade result in higher GDP per capita: An International Perspective

Abstract

The theory of comparative advantage suggests that free trade increases overall world production of goods and services and it is a positive sum game in which all participating countries realise economic gains. The evaluation of data from a number of countries in this study demonstrates a strong correlation between a country's level of trade freedom (according to its Trade Freedom Index) and its GDP per capita. There are exceptions to this trend in countries that have experienced social or political unrest. This is consistent with research into the relationship between economic freedom and GDP growth which suggest that levels of economic freedom (of which trade freedom is a component) in a country impact upon growth subject to social, economic or political climate in these countries.

Trade Facilitation between China and Africa, Gravity Model Analysis How China is Benefiting in Trade with African Countries?

“…This implies an increase in the value of Moroccan exports when it trades with countries of large economic size. This finding is perfectly in line with the results of Kee et al [46] and Lambrechts, Erin, and Rule [47] who provide strong evidence for a strong correlation between a country's trade volume and its GDP.…”

“…The increase in the GDP in Africa influences positively the chances of trade with china;However, when there is a large gap between Morocco and its trading partners in terms of GDPper capita, it seems that the probability of trade decreases. This partly confirms the work of Lambrechts, Erin, and Rule [44] who suggests that there is a strong correlation between a country's level of trade freedom and its GDP per capita.…”

Effects of Trade Openness on Economic Growth in the Republic of Congo

“…This result does not confirm our initial hypothesis. However, it does validate the work of Lambrechts, McGrath, and Rule (2012) who state that other factors may also play a role in GDP growth and that when social unrest is evident, levels of trade freedom may not align with GDP growth. Economic growth and free trade cannot be measured in isolation to prove whether growth is improving or slowing.…”

“…The issue is complex and requires a thorough analysis of economic freedom factors encompassing business freedom, monetary freedom and property rights. Countries such as Argentina and Mexico have demonstrated that other factors can also affect GDP growth and that, when social unrest is evident, levels of trade freedom would not align with GDP growth (Lambrechts, McGrath, & Rule, 2012).…”