Over the last four decades, many developing countries initiated reforms that have lowered barriers to trade. Yet despite these reforms, developing countries still remain far less open than developed ones, both because of tariffs that remain high but also weak contract and regulatory enforcement, inadequate transport infrastructure, search frictions, and a plethora of other distortions that are more severe in the developing world. This survey summarises a broad set of empirical work that explores the impact of international trade in developing countries characterised by weak institutions, market failures and firm distortions. For each of these categories we ask how the effects of trade policy may differ in the presence of such frictions, how trade may moderate or exacerbate the friction itself, and how policies should respond in the light of the answers to the first two questions.
Presentation of key takeaways:
For our launch event, Senior Editors David Atkin and Amit Khandelwal joined us to outline the key takeaways from this VoxDevLit, highlighting policy relevant results from recent research at the intersection of international trade and development.