The Impact of International Trade on Welfare

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The impacts of trade liberalization on economic development is a long debated issue. Because changes in international trade policies impact the economy through several channels, arguments for and against trade liberalization are easily found. In the end, the accuracy of the cost-benefit analysis depends on exact estimation of the overall impact of these numerous effects on welfare. In this proposal, I suggest using recent advances in international trade theory to obtain new and credible estimates for the impact globalization on economic growth. The main innovation is to take into account the endogeneity of institutions in order to disentangle the separate effects of increased economic integration and changes in institutions’ quality.