Development and Trade: Empirical Evidence

How do we know that trade is good for economic development? This video covers a few natural experiments, comparing GDP in countries that face high trade barriers to those with relatively free trade. Some of these experiments include: the difference in GDP between land-locked countries and those with access to coasts; how the closing of the Suez Canal in 1967 affected GDP in certain countries; how trade liberalization in China in 1978 led to a boom in economic growth; and how India's service sector has taken off thanks to trade. This video also covers sources of growth from trade beyond comparative advantage, including how competition spurs efficiency and productivity; how investment differs before and after trade liberalization; and how increases in knowledge and ideas affect productivity.