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The impact of international trade flows on economic growth in Brazilian states

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Author(s): Marie Daumal | Selin Özyurt

Journal: Review of Economics and Institutions
ISSN 2038-1379

Volume: 2;
Issue: 1;
Date: 2011;
Original page

Keywords: international trade | growth equation | GMM estimator | Brazilian states

ABSTRACT
This paper explores the impact of trade openness on the economic growth of Brazilian states according to their initial income level. This empiri- cal study covers 26 Brazilian states over the period 1989-2002. Growth rates of Brazilian states are modeled as dependent on international trade flows and a set of control variables such as initial income level, human capital, private and public physical capital, growth rate of labor force and a number of inter- action terms with trade openness. This empirical analysis relies on dynamic growth regressions, using the system GMM estimator. The results indicate that trade openness is more beneficial to states with a high level of initial per capita income and therefore contributes to increased regional dispari- ties in Brazil. In addition, trade openness favors more industrialized states, well-endowed in human capital, rather than states whose economic activity is mainly based on agriculture and farming. These results have important policy implications since achieving balanced territorial development has be- come a priority for the Brazilian federal government over the last few decades.
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