Does free trade result in higher GDP per capita: An International Perspective

Abstract

The theory of comparative advantage suggests that free trade increases overall world production of goods and services and it is a positive sum game in which all participating countries realise economic gains. The evaluation of data from a number of countries in this study demonstrates a strong correlation between a country’s level of trade freedom (according to its Trade Freedom Index) and its GDP per capita. There are exceptions to this trend in countries that have experienced social or political unrest. This is consistent with research into the relationship between economic freedom and GDP growth which suggest that levels of economic freedom (of which trade freedom is a component) in a country impact upon growth subject to social, economic or political climate in these countries