Who gains from trade reform? Some remaining puzzles

Abstract

Morocco, we explore several explanations for the small employment and output response to large changes in tariffs and quotas.Finally, Section III discusses the relationship between rising wage inequality and trade reform in Mexico. I. Trade Policies and Long Run GrowthThe Relationship between Trade and Growth Static trade models suggest that movements towards openness can temporarily increase the rate of growth due to short-run gains from the reallocation of resources, which would imply a positive relationship between changes in openness and GDP growth.The new growth literature also identifies a number of avenues through which openness might affect long run growth.Edwards (1998), for example, shows that technological change is a positive function of both a country's openness and the gap between a country's technology level and the rest of the world.Intuitively, countries which are more backward and provide more opportunities to absorb new ideas will converge faster to international norms.Coe and Helpman (1995) discuss how recent models of economic growth imply a positive relationship between openness to trade and total factor productivity growth, or TFP.Drawing on Grossman and Helpman (1991), they argue that differences in TFP can be explained by either an expanding number of inputs or higher input quality.To the extent that countries which are open to trade can either learn more quickly how to produce these new inputs, or can import them, openness will be positively related to TFP.Grossman and Helpman (1991), however, show that in a theoretical framework, the relationship between opening up to trade and long run growth is in fact ambiguous.Whether or