Impact of trade freedom on per capita real GDP growth among OECD nations: recent panel data evidence

Abstract

Motivated by the Organisation for Economic Co-operation and Development (OECD)’s call to nations to resist protectionism and keep markets open to competition in the midst of the current world economic crisis, this study empirically investigates the impact of trade freedom (TF) on recent per capita real Gross Domestic Product (GDP) growth among OECD nations. In addition to TF, the study controls for the impacts of Business Freedom (BF), Monetary Freedom (MF) and Property Rights (PR), along with various economic factors. The study period runs from 2005 to 2007. Panel Least-Squares (PLS) estimation finds that the natural log of per capita real Purchasing-Power-Parity (PPP)-adjusted GDP in OECD nations is in fact an increasing function of TF, as well as BF, MF and PR security. The OECD appears correct in its position on behalf of maintaining TF.