Estimating Trade Restrictiveness Indices

Studies of the impact of trade restrictiveness on growth, poverty or unemployment are frequent in the academic literature. Few authors, however, provide a precise definition of what they mean by trade restrictiveness. When they do, the definition is unlikely to have tight links with trade theory. The objective of this article is to fill this gap by providing for 78 developing and developed countries clearly defined indicators of trade restrictiveness that are well grounded in trade theory. Results suggest that poor countries tend to have more restrictive trade policies but they also face higher trade barriers on their exports. Analyses of the impact of trade restrictiveness on economic and social outcomes are quite common in academic literature and policy discussions. Indicators of trade restrictiveness are used to study the effects of trade policy on growth (Edwards, 1998; Frankel and Romer, 1999), poverty (Dollar and Kraay, 2003), or firm productivity (Melitz, 2003). Trade restrictiveness indicators are also an essential input to trade negotiators and to any study attempting to understand the institutional and political determinants of trade protection (Grossman and Helpman, 1994). Indicators of trade restrictiveness are also needed when trade reforms are part of the condition